WEBVTT 00:00:00.000 --> 00:00:00.500 align:middle line:90% 00:00:00.500 --> 00:00:01.961 align:middle line:90% [SQUEAKING] 00:00:01.961 --> 00:00:04.396 align:middle line:90% [RUSTLING] 00:00:04.396 --> 00:00:05.370 align:middle line:90% [CLICKING] 00:00:05.370 --> 00:00:10.087 align:middle line:90% 00:00:10.087 --> 00:00:11.420 align:middle line:90% JOSEPH HADZIMA: I'm Joe Hadzima. 00:00:11.420 --> 00:00:14.600 align:middle line:84% I'm going to be your guide on our six-session journey 00:00:14.600 --> 00:00:18.782 align:middle line:84% through the Nuts and Bolts of New Ventures. 00:00:18.782 --> 00:00:20.240 align:middle line:84% Tonight at the beginning, I'm going 00:00:20.240 --> 00:00:23.360 align:middle line:84% to try to give you a set of guideposts for you 00:00:23.360 --> 00:00:26.360 align:middle line:84% to think about as you go into detail on all 00:00:26.360 --> 00:00:29.040 align:middle line:84% of the topics we're going to cover over the next six 00:00:29.040 --> 00:00:30.520 align:middle line:90% sessions. 00:00:30.520 --> 00:00:36.560 align:middle line:84% And in that regard, I'm going to ask you a bunch of questions 00:00:36.560 --> 00:00:39.320 align:middle line:84% that I want you to think about after every session 00:00:39.320 --> 00:00:40.880 align:middle line:90% that you come to. 00:00:40.880 --> 00:00:43.480 align:middle line:84% Because at the end, if you can answer those questions, 00:00:43.480 --> 00:00:45.660 align:middle line:84% or at least get closer to the answers, 00:00:45.660 --> 00:00:50.160 align:middle line:84% we'll have accomplished a whole bunch about your journey. 00:00:50.160 --> 00:00:54.840 align:middle line:84% So the first question is, why are you here? 00:00:54.840 --> 00:00:59.280 align:middle line:84% It's a beautiful, warm night in Cambridge, wind chills 00:00:59.280 --> 00:01:01.340 align:middle line:90% in the single digits. 00:01:01.340 --> 00:01:02.108 align:middle line:90% Why are you here? 00:01:02.108 --> 00:01:03.900 align:middle line:84% I know it was for the three units of credit 00:01:03.900 --> 00:01:07.020 align:middle line:84% you're going to get for the students. 00:01:07.020 --> 00:01:11.660 align:middle line:84% Perhaps you don't know anything about entrepreneurship, 00:01:11.660 --> 00:01:14.260 align:middle line:84% and you'd like to find out something. 00:01:14.260 --> 00:01:16.660 align:middle line:84% You just want to dip your toe in the water. 00:01:16.660 --> 00:01:20.660 align:middle line:84% So how many people here have not taken a formal course 00:01:20.660 --> 00:01:23.140 align:middle line:90% in entrepreneurship? 00:01:23.140 --> 00:01:25.140 align:middle line:90% OK, there you go. 00:01:25.140 --> 00:01:25.840 align:middle line:90% All right. 00:01:25.840 --> 00:01:28.940 align:middle line:84% [LAUGHS] Including Bob back there. 00:01:28.940 --> 00:01:30.700 align:middle line:84% So we're going to hopefully-- so this is 00:01:30.700 --> 00:01:32.280 align:middle line:90% a great environment for that. 00:01:32.280 --> 00:01:35.180 align:middle line:84% It's a two-week period during January 00:01:35.180 --> 00:01:37.420 align:middle line:84% where you don't have a lot of other distractions. 00:01:37.420 --> 00:01:40.580 align:middle line:84% And hopefully, we'll cover a lot of the things that will tell you 00:01:40.580 --> 00:01:43.700 align:middle line:90% a lot about entrepreneurship. 00:01:43.700 --> 00:01:47.020 align:middle line:84% Maybe you see something that sucks 00:01:47.020 --> 00:01:49.820 align:middle line:90% and you want to make it better. 00:01:49.820 --> 00:01:52.060 align:middle line:90% Anybody have that? 00:01:52.060 --> 00:01:53.280 align:middle line:90% OK, good. 00:01:53.280 --> 00:01:55.820 align:middle line:84% Well, another student who had that 00:01:55.820 --> 00:01:58.720 align:middle line:84% was somebody who was taking a bus back from New York 00:01:58.720 --> 00:02:02.440 align:middle line:84% City after Thanksgiving back to campus, 00:02:02.440 --> 00:02:08.199 align:middle line:84% and he forgot his USB drive, and he couldn't get his files. 00:02:08.199 --> 00:02:11.080 align:middle line:84% And he said, I wasted the whole trip. 00:02:11.080 --> 00:02:14.100 align:middle line:84% I want to figure out how I can have those files anytime, 00:02:14.100 --> 00:02:15.560 align:middle line:90% anywhere I am. 00:02:15.560 --> 00:02:18.560 align:middle line:84% And I said, well, you know, that's cloud storage, right? 00:02:18.560 --> 00:02:19.940 align:middle line:90% That's Google Drive. 00:02:19.940 --> 00:02:22.240 align:middle line:90% That's box.com. 00:02:22.240 --> 00:02:25.000 align:middle line:84% And he said, yeah, but they really suck, 00:02:25.000 --> 00:02:27.880 align:middle line:84% and I'm going to make something that doesn't suck. 00:02:27.880 --> 00:02:30.920 align:middle line:84% He went on to found something called Dropbox, 00:02:30.920 --> 00:02:32.580 align:middle line:84% and I've been using it ever since. 00:02:32.580 --> 00:02:34.280 align:middle line:90% And it certainly doesn't suck. 00:02:34.280 --> 00:02:35.680 align:middle line:90% It works quite well. 00:02:35.680 --> 00:02:39.840 align:middle line:84% So maybe that's something that you want. 00:02:39.840 --> 00:02:41.567 align:middle line:84% Maybe you have an idea or an invention, 00:02:41.567 --> 00:02:43.400 align:middle line:84% and you want to bring it to life because you 00:02:43.400 --> 00:02:45.400 align:middle line:90% want to change the world. 00:02:45.400 --> 00:02:47.560 align:middle line:84% I think for most people that I run 00:02:47.560 --> 00:02:50.440 align:middle line:84% into in entrepreneurship, that's sort of a primary driving 00:02:50.440 --> 00:02:51.920 align:middle line:90% factor. 00:02:51.920 --> 00:02:54.600 align:middle line:84% They think they can make a big difference. 00:02:54.600 --> 00:02:59.060 align:middle line:84% And that's, I think, a real driver for most people. 00:02:59.060 --> 00:03:02.220 align:middle line:84% Of course, being an entrepreneur is glamorous, 00:03:02.220 --> 00:03:05.260 align:middle line:90% and you can make a lot of money. 00:03:05.260 --> 00:03:08.580 align:middle line:90% How many people like that one? 00:03:08.580 --> 00:03:09.080 align:middle line:90% OK. 00:03:09.080 --> 00:03:11.240 align:middle line:84% There's good, realistic people in the audience. 00:03:11.240 --> 00:03:14.060 align:middle line:90% Well, we'll talk about that too. 00:03:14.060 --> 00:03:16.400 align:middle line:84% So many questions-- regardless of why you're here, 00:03:16.400 --> 00:03:18.500 align:middle line:84% so many questions you need to ask, 00:03:18.500 --> 00:03:21.860 align:middle line:84% and we're going to try to help you over the next six sessions. 00:03:21.860 --> 00:03:23.300 align:middle line:90% How do I start? 00:03:23.300 --> 00:03:26.620 align:middle line:90% What actually do I do? 00:03:26.620 --> 00:03:28.360 align:middle line:90% What is the problem I'm solving? 00:03:28.360 --> 00:03:31.700 align:middle line:90% 00:03:31.700 --> 00:03:35.800 align:middle line:84% Does my solution provide an answer to that problem? 00:03:35.800 --> 00:03:38.340 align:middle line:90% 00:03:38.340 --> 00:03:40.300 align:middle line:90% Who cares about my idea? 00:03:40.300 --> 00:03:43.300 align:middle line:90% Specifically, who cares? 00:03:43.300 --> 00:03:45.740 align:middle line:90% Who's my customer? 00:03:45.740 --> 00:03:48.120 align:middle line:90% And how do I find these people? 00:03:48.120 --> 00:03:50.960 align:middle line:84% Bob Jones will be here in the second part of this evening, 00:03:50.960 --> 00:03:53.860 align:middle line:84% and he's going to be talking a lot about that. 00:03:53.860 --> 00:03:58.400 align:middle line:84% If you don't have a customer, you don't have anything. 00:03:58.400 --> 00:04:02.320 align:middle line:84% How will I make money and make it a sustainable venture? 00:04:02.320 --> 00:04:05.400 align:middle line:84% That's the business model or the venture model, we call it. 00:04:05.400 --> 00:04:09.360 align:middle line:84% And we'll be talking about that tomorrow. 00:04:09.360 --> 00:04:11.780 align:middle line:84% How long will it take to bring my solution to market? 00:04:11.780 --> 00:04:12.700 align:middle line:90% What will it cost? 00:04:12.700 --> 00:04:14.600 align:middle line:90% What resources will I need? 00:04:14.600 --> 00:04:17.880 align:middle line:84% All of that stuff is about financial projections 00:04:17.880 --> 00:04:21.800 align:middle line:84% and thinking through the model that you have. 00:04:21.800 --> 00:04:24.800 align:middle line:84% Will I need to set up some of entity 00:04:24.800 --> 00:04:28.020 align:middle line:84% to attract investors, other people to join me? 00:04:28.020 --> 00:04:29.060 align:middle line:90% And what should it be? 00:04:29.060 --> 00:04:29.720 align:middle line:90% Corporation. 00:04:29.720 --> 00:04:32.360 align:middle line:84% Maybe a limited liability company. 00:04:32.360 --> 00:04:35.800 align:middle line:84% And can I use that in any way to provide some ownership 00:04:35.800 --> 00:04:37.320 align:middle line:90% incentive for people? 00:04:37.320 --> 00:04:40.320 align:middle line:90% We'll be talking about that. 00:04:40.320 --> 00:04:44.800 align:middle line:84% How do I keep people from stealing my idea? 00:04:44.800 --> 00:04:48.635 align:middle line:84% Maybe you want to put it out there for everyone, 00:04:48.635 --> 00:04:51.260 align:middle line:84% but maybe you want to control a little bit of how it gets used. 00:04:51.260 --> 00:04:53.040 align:middle line:84% So we'll talk about, can you do it? 00:04:53.040 --> 00:04:56.860 align:middle line:84% And how could you protect your idea? 00:04:56.860 --> 00:04:58.580 align:middle line:90% Will I need co-founders? 00:04:58.580 --> 00:05:01.460 align:middle line:84% And what will our relationship be? 00:05:01.460 --> 00:05:05.780 align:middle line:84% Do we need some of an agreement, maybe a founders agreement? 00:05:05.780 --> 00:05:09.035 align:middle line:84% Tomorrow we'll have a panel on the founders journey. 00:05:09.035 --> 00:05:11.160 align:middle line:84% Some people that are in the midst of their journey, 00:05:11.160 --> 00:05:14.460 align:middle line:84% you can ask that question to them too. 00:05:14.460 --> 00:05:17.860 align:middle line:84% How will I negotiate with employees, consultants, 00:05:17.860 --> 00:05:18.600 align:middle line:90% whatever? 00:05:18.600 --> 00:05:22.560 align:middle line:84% Entrepreneurs are always negotiating, right? 00:05:22.560 --> 00:05:24.060 align:middle line:84% Because almost by definition, you're 00:05:24.060 --> 00:05:26.020 align:middle line:84% trying to assemble things you don't really 00:05:26.020 --> 00:05:29.860 align:middle line:84% own or control to accomplish a vision you have. 00:05:29.860 --> 00:05:31.660 align:middle line:84% So you've got to negotiate in some way 00:05:31.660 --> 00:05:35.020 align:middle line:84% to bring on customers, to bring on people 00:05:35.020 --> 00:05:38.860 align:middle line:84% that are going to join your team, advisors and investors. 00:05:38.860 --> 00:05:42.780 align:middle line:84% We'll have a session on negotiation. 00:05:42.780 --> 00:05:43.800 align:middle line:90% And the big one. 00:05:43.800 --> 00:05:48.100 align:middle line:84% How do I figure out what I don't know? 00:05:48.100 --> 00:05:51.620 align:middle line:84% And one simple answer to that is, well, maybe you 00:05:51.620 --> 00:05:56.615 align:middle line:84% find people that have done it before who can advise you. 00:05:56.615 --> 00:05:58.990 align:middle line:84% The reason I'm here and all the other presenters are here 00:05:58.990 --> 00:06:00.730 align:middle line:90% is we've been down this path. 00:06:00.730 --> 00:06:03.510 align:middle line:84% We have plenty of scars, and we can perhaps 00:06:03.510 --> 00:06:08.790 align:middle line:84% tell you what not to do or caution you on things. 00:06:08.790 --> 00:06:10.470 align:middle line:84% What are the potholes in the road, 00:06:10.470 --> 00:06:12.470 align:middle line:90% and how will I recognize them? 00:06:12.470 --> 00:06:15.130 align:middle line:84% You know, you're going to make mistakes. 00:06:15.130 --> 00:06:17.750 align:middle line:84% If you don't, you're not doing it right. 00:06:17.750 --> 00:06:20.630 align:middle line:84% The problem is not making a mistake. 00:06:20.630 --> 00:06:23.830 align:middle line:90% It's making it twice, right? 00:06:23.830 --> 00:06:26.330 align:middle line:84% So if you make a same mistake twice, 00:06:26.330 --> 00:06:27.710 align:middle line:90% you haven't learned anything. 00:06:27.710 --> 00:06:30.590 align:middle line:84% The problem in entrepreneurship, really, 00:06:30.590 --> 00:06:35.368 align:middle line:84% is those things come at you in different clothing. 00:06:35.368 --> 00:06:36.910 align:middle line:84% And there have been a number of cases 00:06:36.910 --> 00:06:41.150 align:middle line:84% when I've been down the road and I go, oh. 00:06:41.150 --> 00:06:42.370 align:middle line:90% I recognize this. 00:06:42.370 --> 00:06:44.430 align:middle line:90% I've been here before. 00:06:44.430 --> 00:06:46.430 align:middle line:90% I didn't see it coming. 00:06:46.430 --> 00:06:50.150 align:middle line:84% How can we give you some early warning things on that? 00:06:50.150 --> 00:06:53.490 align:middle line:84% So there are a lot of moving pieces. 00:06:53.490 --> 00:06:57.970 align:middle line:84% So the next question is, why do this? 00:06:57.970 --> 00:07:01.083 align:middle line:84% These are personal questions for you 00:07:01.083 --> 00:07:03.250 align:middle line:84% that you ought to think about as you hear everything 00:07:03.250 --> 00:07:04.270 align:middle line:90% through the course. 00:07:04.270 --> 00:07:08.165 align:middle line:90% 00:07:08.165 --> 00:07:09.930 align:middle line:90% Oh, did I miss one? 00:07:09.930 --> 00:07:11.670 align:middle line:90% A lot of-- oh, why do this? 00:07:11.670 --> 00:07:12.170 align:middle line:90% Sorry. 00:07:12.170 --> 00:07:13.890 align:middle line:90% What's the reward? 00:07:13.890 --> 00:07:14.850 align:middle line:90% Fame? 00:07:14.850 --> 00:07:16.050 align:middle line:90% Fortune? 00:07:16.050 --> 00:07:18.570 align:middle line:90% You may recognize these people. 00:07:18.570 --> 00:07:21.090 align:middle line:84% Some of them were at the presidential inauguration 00:07:21.090 --> 00:07:23.490 align:middle line:90% yesterday. 00:07:23.490 --> 00:07:24.850 align:middle line:90% OK. 00:07:24.850 --> 00:07:28.970 align:middle line:84% That may be the reward, but this is the reality. 00:07:28.970 --> 00:07:32.250 align:middle line:84% This is-- how many people have heard of Nvidia? 00:07:32.250 --> 00:07:32.810 align:middle line:90% Yeah. 00:07:32.810 --> 00:07:36.610 align:middle line:84% Jensen Huang, the founder, was interviewed. 00:07:36.610 --> 00:07:39.570 align:middle line:84% And he said he built $1 trillion company, give or take 00:07:39.570 --> 00:07:40.470 align:middle line:90% a couple of billion. 00:07:40.470 --> 00:07:42.730 align:middle line:90% That's what it's worth today. 00:07:42.730 --> 00:07:43.630 align:middle line:90% Would he do it again? 00:07:43.630 --> 00:07:46.850 align:middle line:90% He said, I don't think I would. 00:07:46.850 --> 00:07:52.110 align:middle line:84% If I'd known three decades ago what it would take, 00:07:52.110 --> 00:07:53.670 align:middle line:90% I wouldn't have done it. 00:07:53.670 --> 00:07:54.890 align:middle line:90% This quote is amazing. 00:07:54.890 --> 00:07:56.810 align:middle line:84% "If we realized the pain, suffering, 00:07:56.810 --> 00:07:58.610 align:middle line:84% and how vulnerable you're going to feel, 00:07:58.610 --> 00:08:01.567 align:middle line:84% the challenges you're going to endure, 00:08:01.567 --> 00:08:04.150 align:middle line:84% the embarrassment and the shame and the list of all the things 00:08:04.150 --> 00:08:08.750 align:middle line:84% that could go wrong, nobody in their right mind would do it." 00:08:08.750 --> 00:08:13.190 align:middle line:84% So I must conclude from that, you guys are all crazy, right? 00:08:13.190 --> 00:08:16.550 align:middle line:84% [LAUGHS] But this is a guy who spent three decades 00:08:16.550 --> 00:08:19.310 align:middle line:90% to get there. 00:08:19.310 --> 00:08:26.110 align:middle line:84% The reality is only 10% of startups succeed. 00:08:26.110 --> 00:08:27.630 align:middle line:90% 10%. 00:08:27.630 --> 00:08:30.310 align:middle line:90% Nine out of 10 fail. 00:08:30.310 --> 00:08:33.150 align:middle line:84% Now, this includes everything from sandwich shops and things 00:08:33.150 --> 00:08:35.630 align:middle line:90% like that. 00:08:35.630 --> 00:08:40.270 align:middle line:84% Now, many of you are interested in venture capital, I'm sure. 00:08:40.270 --> 00:08:44.150 align:middle line:84% What do you think the success rate is for venture capitalists? 00:08:44.150 --> 00:08:47.550 align:middle line:84% Out of every 10 companies they invest, how many successes 00:08:47.550 --> 00:08:49.610 align:middle line:90% do they have? 00:08:49.610 --> 00:08:50.910 align:middle line:90% Anybody? 00:08:50.910 --> 00:08:51.410 align:middle line:90% One. 00:08:51.410 --> 00:08:53.290 align:middle line:90% I hear one. 00:08:53.290 --> 00:08:54.850 align:middle line:90% Two. 00:08:54.850 --> 00:08:56.810 align:middle line:90% Anybody else? 00:08:56.810 --> 00:09:00.090 align:middle line:84% Well, the most successful long-term firm 00:09:00.090 --> 00:09:03.250 align:middle line:84% was Kleiner Perkins, and they got three successes 00:09:03.250 --> 00:09:06.690 align:middle line:84% for every 10 companies that they invested in. 00:09:06.690 --> 00:09:09.930 align:middle line:84% Now, these are guys with money, smarts. 00:09:09.930 --> 00:09:11.690 align:middle line:84% With venture capitalists, you've got 00:09:11.690 --> 00:09:14.810 align:middle line:84% to realize they're always the smartest people in the room. 00:09:14.810 --> 00:09:16.630 align:middle line:84% Do make sure you understand that. 00:09:16.630 --> 00:09:19.890 align:middle line:90% [LAUGHS] They'll let you know. 00:09:19.890 --> 00:09:21.570 align:middle line:90% And connections. 00:09:21.570 --> 00:09:26.330 align:middle line:84% And with all of that, they only win three out of every 10 times. 00:09:26.330 --> 00:09:28.850 align:middle line:84% Can you think of any other thing you 00:09:28.850 --> 00:09:32.570 align:middle line:84% could do where if you failed seven times out of 10, 00:09:32.570 --> 00:09:33.930 align:middle line:90% you'd be a hero? 00:09:33.930 --> 00:09:34.722 align:middle line:90% AUDIENCE: Baseball. 00:09:34.722 --> 00:09:35.763 align:middle line:90% JOSEPH HADZIMA: Baseball. 00:09:35.763 --> 00:09:36.290 align:middle line:90% Right. 00:09:36.290 --> 00:09:40.393 align:middle line:84% If you bat 300, you're probably leading the league, and you're 00:09:40.393 --> 00:09:42.810 align:middle line:84% probably making-- what do they make now? $50, $100 million 00:09:42.810 --> 00:09:43.850 align:middle line:90% a year? 00:09:43.850 --> 00:09:47.990 align:middle line:84% So if you really want to make money, go play baseball. 00:09:47.990 --> 00:09:53.310 align:middle line:84% But the point is, success is only 10% in general. 00:09:53.310 --> 00:09:56.770 align:middle line:84% Now, there are many reasons when you look into them. 00:09:56.770 --> 00:10:00.870 align:middle line:84% I want to focus on the one in the bottom right, which 00:10:00.870 --> 00:10:04.290 align:middle line:84% says 99% of the time people fail-- by the way, 00:10:04.290 --> 00:10:06.090 align:middle line:84% these slides will all be available, 00:10:06.090 --> 00:10:09.150 align:middle line:90% but feel free to take pictures. 00:10:09.150 --> 00:10:15.470 align:middle line:84% 99% fail because of a lack of planning and experience. 00:10:15.470 --> 00:10:18.310 align:middle line:84% We're going to try to help you on the planning part, 00:10:18.310 --> 00:10:22.030 align:middle line:84% and with that, you'll get experience. 00:10:22.030 --> 00:10:26.170 align:middle line:84% But even though 10% is a success rate, maybe all is not dismal. 00:10:26.170 --> 00:10:28.070 align:middle line:90% We're here at MIT. 00:10:28.070 --> 00:10:29.950 align:middle line:90% The Kaufmann report. 00:10:29.950 --> 00:10:32.670 align:middle line:84% MIT is known for entrepreneurship 00:10:32.670 --> 00:10:33.490 align:middle line:90% around the world. 00:10:33.490 --> 00:10:40.470 align:middle line:84% Kaufmann report in 2009 studied the roughly 26,000 active 00:10:40.470 --> 00:10:44.230 align:middle line:84% companies that were founded by MIT alum or faculty. 00:10:44.230 --> 00:10:48.850 align:middle line:84% Now, that's out of 120,000 living alums at the time, 00:10:48.850 --> 00:10:53.930 align:middle line:84% so that's one of every five that were out there. 00:10:53.930 --> 00:10:58.250 align:middle line:84% These companies employed 3.3 million people. 00:10:58.250 --> 00:11:03.010 align:middle line:84% They had annual revenues of $2 trillion a year. 00:11:03.010 --> 00:11:05.910 align:middle line:84% And if you put them together as a single country, 00:11:05.910 --> 00:11:07.410 align:middle line:90% it would be the largest-- 00:11:07.410 --> 00:11:10.570 align:middle line:84% 11th largest economy in the world. 00:11:10.570 --> 00:11:15.030 align:middle line:84% Now, does that mean we're better at success here? 00:11:15.030 --> 00:11:16.210 align:middle line:90% I don't know. 00:11:16.210 --> 00:11:19.610 align:middle line:84% But it might mean that when we do succeed, 00:11:19.610 --> 00:11:22.273 align:middle line:90% they're much bigger successes. 00:11:22.273 --> 00:11:24.690 align:middle line:84% With these statistics, people come from all over the world 00:11:24.690 --> 00:11:27.312 align:middle line:84% to try to figure out how MIT does it. 00:11:27.312 --> 00:11:29.770 align:middle line:84% Well, we'll give you a little hint about some of the things 00:11:29.770 --> 00:11:32.350 align:middle line:90% that can help on that. 00:11:32.350 --> 00:11:32.850 align:middle line:90% OK. 00:11:32.850 --> 00:11:35.750 align:middle line:84% So why this course, after all of that? 00:11:35.750 --> 00:11:40.650 align:middle line:84% Well, this course is not about theory. 00:11:40.650 --> 00:11:43.050 align:middle line:90% It's about doing. 00:11:43.050 --> 00:11:45.510 align:middle line:84% The people that are going to be talking to you 00:11:45.510 --> 00:11:48.990 align:middle line:84% are not academics studying entrepreneurship. 00:11:48.990 --> 00:11:51.470 align:middle line:84% Every single one of them either are actively doing 00:11:51.470 --> 00:11:54.150 align:middle line:84% or have done what they're going to talk about. 00:11:54.150 --> 00:11:58.490 align:middle line:84% And it goes back to the beginning of the course. 00:11:58.490 --> 00:12:00.910 align:middle line:84% I was teaching a course, which is now 00:12:00.910 --> 00:12:03.030 align:middle line:90% called Law for Entrepreneurs. 00:12:03.030 --> 00:12:06.030 align:middle line:84% And some students came up and said, 00:12:06.030 --> 00:12:09.530 align:middle line:84% you have some very practical things that you talk about. 00:12:09.530 --> 00:12:12.830 align:middle line:84% Could you do a course during January Independent Activities 00:12:12.830 --> 00:12:15.190 align:middle line:84% Period on how to start a company? 00:12:15.190 --> 00:12:18.430 align:middle line:84% And I said, oh, you know, I'll think about it. 00:12:18.430 --> 00:12:22.270 align:middle line:84% Well, this was pre-internet, believe it or not. 00:12:22.270 --> 00:12:26.790 align:middle line:84% They went and somehow got the course in the catalog. 00:12:26.790 --> 00:12:29.270 align:middle line:84% And they called me up and said, we put it in the catalog, 00:12:29.270 --> 00:12:32.870 align:middle line:90% and we dare you not to show up. 00:12:32.870 --> 00:12:34.450 align:middle line:84% I said, boy, that's pretty gutsy. 00:12:34.450 --> 00:12:36.930 align:middle line:84% [LAUGHS] I was a little annoyed at that. 00:12:36.930 --> 00:12:40.710 align:middle line:84% But then I said, you know, there's something here. 00:12:40.710 --> 00:12:42.170 align:middle line:90% These are like customers. 00:12:42.170 --> 00:12:44.530 align:middle line:84% These are people that want what they 00:12:44.530 --> 00:12:47.130 align:middle line:90% think I can deliver to them. 00:12:47.130 --> 00:12:48.108 align:middle line:90% They actually want it. 00:12:48.108 --> 00:12:49.150 align:middle line:90% I'm not looking for them. 00:12:49.150 --> 00:12:50.502 align:middle line:90% They came to me. 00:12:50.502 --> 00:12:51.710 align:middle line:90% So how am I going to do that? 00:12:51.710 --> 00:12:53.950 align:middle line:84% I didn't have time to really plan anything out, 00:12:53.950 --> 00:12:57.850 align:middle line:84% so at the time, we had four nights. 00:12:57.850 --> 00:13:01.330 align:middle line:84% And I thought, well, what are two things a night 00:13:01.330 --> 00:13:03.850 align:middle line:90% that we could talk about? 00:13:03.850 --> 00:13:06.090 align:middle line:84% And I got on the phone, and I called people. 00:13:06.090 --> 00:13:07.490 align:middle line:90% And some I knew, and some-- 00:13:07.490 --> 00:13:10.450 align:middle line:90% I knew all the people I called. 00:13:10.450 --> 00:13:13.050 align:middle line:84% Some of them, I said, could you come and talk 00:13:13.050 --> 00:13:17.290 align:middle line:84% to a group of people at MIT, students about whatever 00:13:17.290 --> 00:13:18.110 align:middle line:90% the topic is? 00:13:18.110 --> 00:13:21.630 align:middle line:84% And to make it easy, just come and say, 00:13:21.630 --> 00:13:24.210 align:middle line:84% I wish-- here are the three or four or five whatever 00:13:24.210 --> 00:13:28.130 align:middle line:84% things that I wish somebody had told me about the area 00:13:28.130 --> 00:13:30.910 align:middle line:84% that I'm going to talk about when I started up, 00:13:30.910 --> 00:13:33.703 align:middle line:84% and then we'll just open it up for questions. 00:13:33.703 --> 00:13:35.370 align:middle line:84% Now, about half the people that ended up 00:13:35.370 --> 00:13:38.770 align:middle line:84% showing-- that came to present, I didn't know personally. 00:13:38.770 --> 00:13:40.710 align:middle line:84% But I had people that I called and said, 00:13:40.710 --> 00:13:42.910 align:middle line:84% do you know anyone who could do this? 00:13:42.910 --> 00:13:46.350 align:middle line:84% And they've got to be able to keep it simple. 00:13:46.350 --> 00:13:48.750 align:middle line:84% And then because I was worried that I 00:13:48.750 --> 00:13:52.150 align:middle line:84% was going to get all these people in the audience 00:13:52.150 --> 00:13:53.890 align:middle line:84% or these presenters to come, I said, 00:13:53.890 --> 00:13:55.765 align:middle line:84% I've got to have some people in the audience. 00:13:55.765 --> 00:13:57.470 align:middle line:84% So I called everyone else I knew, and we 00:13:57.470 --> 00:13:59.610 align:middle line:90% packed a room with 120 people. 00:13:59.610 --> 00:14:01.510 align:middle line:84% And people were sitting in the aisles. 00:14:01.510 --> 00:14:03.730 align:middle line:84% And it was a real good lesson for me. 00:14:03.730 --> 00:14:05.990 align:middle line:90% It was a great success. 00:14:05.990 --> 00:14:07.990 align:middle line:84% And it was a real lesson, because what 00:14:07.990 --> 00:14:12.090 align:middle line:84% I did is I basically said, here's the goal. 00:14:12.090 --> 00:14:13.950 align:middle line:90% Here's what we want to do. 00:14:13.950 --> 00:14:16.230 align:middle line:90% I found good people. 00:14:16.230 --> 00:14:18.530 align:middle line:84% I gave them an idea of what to talk about 00:14:18.530 --> 00:14:20.130 align:middle line:84% or what I wanted them to talk about, 00:14:20.130 --> 00:14:23.890 align:middle line:84% and then I got out of the way, and they did a fantastic job. 00:14:23.890 --> 00:14:26.250 align:middle line:84% And we sort of refined that model over the years. 00:14:26.250 --> 00:14:29.870 align:middle line:90% So it's really about doing. 00:14:29.870 --> 00:14:31.210 align:middle line:90% We call it new ventures. 00:14:31.210 --> 00:14:33.450 align:middle line:84% It's planning and executing new ventures. 00:14:33.450 --> 00:14:35.350 align:middle line:90% That could be business. 00:14:35.350 --> 00:14:37.270 align:middle line:90% It could be nonprofit. 00:14:37.270 --> 00:14:38.790 align:middle line:90% It could even be government. 00:14:38.790 --> 00:14:43.530 align:middle line:84% One year, we had the US Mint show up for class. 00:14:43.530 --> 00:14:47.050 align:middle line:84% They were thinking of launching some new thing, 00:14:47.050 --> 00:14:50.370 align:middle line:84% and they wanted to come and see about new ventures. 00:14:50.370 --> 00:14:52.590 align:middle line:84% And by the way, it's the Sloan School of Management. 00:14:52.590 --> 00:14:57.130 align:middle line:84% It's not the Sloan School of Business, so it's in our DNA. 00:14:57.130 --> 00:14:59.450 align:middle line:84% Our goal is to increase the probability 00:14:59.450 --> 00:15:01.810 align:middle line:90% that you'll be in the 10%. 00:15:01.810 --> 00:15:04.130 align:middle line:90% That's what we're trying to do. 00:15:04.130 --> 00:15:08.330 align:middle line:84% Now, you have to recognize that entrepreneurship is a lifetime 00:15:08.330 --> 00:15:10.770 align:middle line:90% incurable disease. 00:15:10.770 --> 00:15:16.050 align:middle line:84% If you get it, you will have it for the rest of your life. 00:15:16.050 --> 00:15:21.370 align:middle line:84% Fortunately, it's not fatal in most cases. 00:15:21.370 --> 00:15:24.730 align:middle line:84% It's highly contagious, and it's transformative. 00:15:24.730 --> 00:15:30.130 align:middle line:84% But what it really is also is a full-contact sport. 00:15:30.130 --> 00:15:31.670 align:middle line:84% So it's, again, not about theory. 00:15:31.670 --> 00:15:34.370 align:middle line:84% It's about getting out there and doing things. 00:15:34.370 --> 00:15:37.290 align:middle line:84% And again, the people that are going to be talking 00:15:37.290 --> 00:15:41.262 align:middle line:84% are doing or have done what's involved. 00:15:41.262 --> 00:15:43.220 align:middle line:84% So let me give you an overview of the specifics 00:15:43.220 --> 00:15:44.762 align:middle line:84% we're going to cover and what you can 00:15:44.762 --> 00:15:47.380 align:middle line:90% learn during the six sessions. 00:15:47.380 --> 00:15:50.580 align:middle line:84% First, how to evaluate a venture from an impact 00:15:50.580 --> 00:15:52.900 align:middle line:90% and economic viewpoint. 00:15:52.900 --> 00:15:54.980 align:middle line:90% This is really a key thing. 00:15:54.980 --> 00:16:00.340 align:middle line:84% What is the scarcest resource you have? 00:16:00.340 --> 00:16:01.648 align:middle line:90% Time. 00:16:01.648 --> 00:16:03.440 align:middle line:84% And if you're planning to do a new venture, 00:16:03.440 --> 00:16:07.020 align:middle line:84% you saw that Nvidia took three decades. 00:16:07.020 --> 00:16:10.218 align:middle line:84% It's not going to be a six-month thing. 00:16:10.218 --> 00:16:12.260 align:middle line:84% And if you're going to spend your time and effort 00:16:12.260 --> 00:16:16.180 align:middle line:84% working on something, you might think at the beginning, 00:16:16.180 --> 00:16:17.980 align:middle line:84% do I think this is going to work? 00:16:17.980 --> 00:16:19.900 align:middle line:90% Is this going to have impact? 00:16:19.900 --> 00:16:21.780 align:middle line:90% How do I do that? 00:16:21.780 --> 00:16:23.740 align:middle line:84% Because it's your time that you're 00:16:23.740 --> 00:16:25.840 align:middle line:90% burning up if you do that. 00:16:25.840 --> 00:16:27.120 align:middle line:90% We had a-- 00:16:27.120 --> 00:16:29.220 align:middle line:84% I used to do a seminar on Tuesday nights. 00:16:29.220 --> 00:16:32.700 align:middle line:84% And I know we have some people from Harvard 00:16:32.700 --> 00:16:35.640 align:middle line:84% here, so I don't mean to disparage people from Harvard. 00:16:35.640 --> 00:16:38.860 align:middle line:84% But one night-- this was a seminar with 12 people. 00:16:38.860 --> 00:16:41.960 align:middle line:84% And one night, three people show up from Harvard Business School. 00:16:41.960 --> 00:16:43.467 align:middle line:90% And we're an open seminar. 00:16:43.467 --> 00:16:44.300 align:middle line:90% I said, well, great. 00:16:44.300 --> 00:16:45.633 align:middle line:90% Well, tell us, why are you here? 00:16:45.633 --> 00:16:46.880 align:middle line:90% What are you looking for? 00:16:46.880 --> 00:16:49.120 align:middle line:84% And they said, well, we're taking an entrepreneurship 00:16:49.120 --> 00:16:51.200 align:middle line:90% course at the business school. 00:16:51.200 --> 00:16:52.560 align:middle line:90% OK. 00:16:52.560 --> 00:16:55.640 align:middle line:90% And we have to start a company. 00:16:55.640 --> 00:16:57.200 align:middle line:90% Excuse me? 00:16:57.200 --> 00:16:58.460 align:middle line:90% You have to start a company? 00:16:58.460 --> 00:16:58.740 align:middle line:90% Yeah, yeah. 00:16:58.740 --> 00:16:59.900 align:middle line:90% We've got to start a company. 00:16:59.900 --> 00:17:00.660 align:middle line:90% Well, like, what is that? 00:17:00.660 --> 00:17:02.520 align:middle line:84% You've got to learn how to incorporate? 00:17:02.520 --> 00:17:03.020 align:middle line:90% No, no. 00:17:03.020 --> 00:17:05.940 align:middle line:84% We actually have to start something. 00:17:05.940 --> 00:17:07.880 align:middle line:90% I said, that's really stupid. 00:17:07.880 --> 00:17:10.960 align:middle line:84% If we spend four months with you looking at something 00:17:10.960 --> 00:17:13.560 align:middle line:84% and you realize this is something you shouldn't do, 00:17:13.560 --> 00:17:15.432 align:middle line:84% it means you're going to fail a course? 00:17:15.432 --> 00:17:16.599 align:middle line:90% And they said, I don't know. 00:17:16.599 --> 00:17:18.960 align:middle line:84% We're supposed to start a company. 00:17:18.960 --> 00:17:21.160 align:middle line:84% The point is, figuring out what to do 00:17:21.160 --> 00:17:22.960 align:middle line:84% and figuring out what not to do are 00:17:22.960 --> 00:17:25.099 align:middle line:90% a key part of entrepreneurship. 00:17:25.099 --> 00:17:25.599 align:middle line:90% OK. 00:17:25.599 --> 00:17:30.480 align:middle line:84% So we're also going to figure out, who's your customer? 00:17:30.480 --> 00:17:34.880 align:middle line:84% How do I get financial resources for the venture? 00:17:34.880 --> 00:17:39.260 align:middle line:84% How do I scale it and make it sustainable? 00:17:39.260 --> 00:17:41.860 align:middle line:84% How do I build and retain a top-notch team 00:17:41.860 --> 00:17:45.380 align:middle line:84% of both internal and external people? 00:17:45.380 --> 00:17:49.580 align:middle line:84% How do I negotiate deals and resolve team conflicts? 00:17:49.580 --> 00:17:52.540 align:middle line:90% What are the legal pitfalls? 00:17:52.540 --> 00:17:56.060 align:middle line:84% And how do I pitch my venture idea? 00:17:56.060 --> 00:17:57.520 align:middle line:90% And Bob is going to come-- 00:17:57.520 --> 00:18:00.000 align:middle line:84% Bob Jones will be back to talk about pitching your venture. 00:18:00.000 --> 00:18:01.780 align:middle line:90% And it's not only to investors. 00:18:01.780 --> 00:18:05.380 align:middle line:84% It's to all the people you need to convince to join you 00:18:05.380 --> 00:18:07.820 align:middle line:84% in whatever journey you're taking. 00:18:07.820 --> 00:18:10.940 align:middle line:84% So there are a lot of moving pieces here. 00:18:10.940 --> 00:18:12.620 align:middle line:84% These personal questions, these are 00:18:12.620 --> 00:18:13.912 align:middle line:90% things you need to think about. 00:18:13.912 --> 00:18:15.280 align:middle line:90% Do you really want to do this? 00:18:15.280 --> 00:18:17.820 align:middle line:90% 00:18:17.820 --> 00:18:19.320 align:middle line:90% Right? 00:18:19.320 --> 00:18:21.420 align:middle line:90% Should you do it? 00:18:21.420 --> 00:18:23.500 align:middle line:90% Why? 00:18:23.500 --> 00:18:25.820 align:middle line:84% And should you do it now or later? 00:18:25.820 --> 00:18:29.780 align:middle line:84% If you're an MIT student now, you know how hard MIT is, 00:18:29.780 --> 00:18:32.160 align:middle line:84% and how you're getting by on meager resources, 00:18:32.160 --> 00:18:34.700 align:middle line:84% and your diet probably isn't the best in the world. 00:18:34.700 --> 00:18:36.867 align:middle line:84% Probably a good time to start a company, because you 00:18:36.867 --> 00:18:38.600 align:middle line:90% won't notice a difference. 00:18:38.600 --> 00:18:40.700 align:middle line:84% 10 years later, you're married with children. 00:18:40.700 --> 00:18:44.000 align:middle line:90% A whole different scenario. 00:18:44.000 --> 00:18:45.440 align:middle line:90% And is this for me? 00:18:45.440 --> 00:18:47.060 align:middle line:84% So as you look at each of the sessions 00:18:47.060 --> 00:18:51.140 align:middle line:84% and we dig down into the nuts and bolts, think about these. 00:18:51.140 --> 00:18:55.360 align:middle line:84% And by the end, think about personally, 00:18:55.360 --> 00:18:58.000 align:middle line:90% what does this mean for you? 00:18:58.000 --> 00:18:58.840 align:middle line:90% OK. 00:18:58.840 --> 00:19:01.440 align:middle line:90% So what's tonight's plan? 00:19:01.440 --> 00:19:03.480 align:middle line:84% We're going to talk about who you are. 00:19:03.480 --> 00:19:05.680 align:middle line:84% We're going to introduce the teaching team. 00:19:05.680 --> 00:19:08.360 align:middle line:84% I'm going to give you an overview of our frameworks-- 00:19:08.360 --> 00:19:09.425 align:middle line:90% I hate frameworks. 00:19:09.425 --> 00:19:10.800 align:middle line:84% I'm going to give you some things 00:19:10.800 --> 00:19:14.600 align:middle line:84% to think about to help you digest the stuff you're 00:19:14.600 --> 00:19:16.160 align:middle line:90% going to see in the future. 00:19:16.160 --> 00:19:18.240 align:middle line:84% Then we're going to do a break for team building, 00:19:18.240 --> 00:19:19.640 align:middle line:90% and we'll talk about that. 00:19:19.640 --> 00:19:23.880 align:middle line:84% And then Bob will be back with his magnifying glass, looking 00:19:23.880 --> 00:19:27.600 align:middle line:84% for binoculars, looking for customers. 00:19:27.600 --> 00:19:30.960 align:middle line:90% So who are you? 00:19:30.960 --> 00:19:37.100 align:middle line:84% Well, you're students from all of these different departments. 00:19:37.100 --> 00:19:40.460 align:middle line:84% The first time we opened this up for credit, 00:19:40.460 --> 00:19:42.180 align:middle line:84% we didn't know who was in the audience. 00:19:42.180 --> 00:19:43.430 align:middle line:90% And it was really interesting. 00:19:43.430 --> 00:19:46.265 align:middle line:84% We had a clump of people over there 00:19:46.265 --> 00:19:47.640 align:middle line:84% and a clump of people over there. 00:19:47.640 --> 00:19:50.200 align:middle line:84% And I said-- and I'll do it tonight. 00:19:50.200 --> 00:19:53.300 align:middle line:90% How many people from Sloan? 00:19:53.300 --> 00:19:53.980 align:middle line:90% OK. 00:19:53.980 --> 00:19:57.500 align:middle line:84% How many people from science and engineering? 00:19:57.500 --> 00:19:58.000 align:middle line:90% Oh, good. 00:19:58.000 --> 00:19:58.360 align:middle line:90% All right. 00:19:58.360 --> 00:20:00.027 align:middle line:84% You've done better than the first class, 00:20:00.027 --> 00:20:01.780 align:middle line:84% because all the Sloan people were there, 00:20:01.780 --> 00:20:04.380 align:middle line:84% and the science and engineering people were over there. 00:20:04.380 --> 00:20:05.880 align:middle line:84% And so I said to the Sloan people, 00:20:05.880 --> 00:20:07.440 align:middle line:90% look at the number on your seat. 00:20:07.440 --> 00:20:10.180 align:middle line:84% If it's an odd number, get up and go find an odd number. 00:20:10.180 --> 00:20:13.340 align:middle line:84% Switch, because we wanted to bring people together. 00:20:13.340 --> 00:20:15.712 align:middle line:84% And then I'm thinking, god, how is this going to work? 00:20:15.712 --> 00:20:17.420 align:middle line:84% The Sloan people probably know everything 00:20:17.420 --> 00:20:21.437 align:middle line:84% I'm going to talk about, so I'm going to bore them to death. 00:20:21.437 --> 00:20:24.020 align:middle line:84% And the science and engineering people, this is all brand new, 00:20:24.020 --> 00:20:26.980 align:middle line:84% and they're really smart, but am I going to overload them? 00:20:26.980 --> 00:20:29.300 align:middle line:84% But I had what I had, and I just went forward. 00:20:29.300 --> 00:20:32.080 align:middle line:84% And it turned out to work well, because the things 00:20:32.080 --> 00:20:35.080 align:middle line:84% we were talking about were very practical things. 00:20:35.080 --> 00:20:36.720 align:middle line:84% So the range of people here-- these 00:20:36.720 --> 00:20:41.520 align:middle line:84% are the interest groups that if you signed up on the email list 00:20:41.520 --> 00:20:43.720 align:middle line:90% that people were interested in. 00:20:43.720 --> 00:20:46.120 align:middle line:84% We'll talk about that at the break. 00:20:46.120 --> 00:20:48.100 align:middle line:84% We also have nonstudent participants. 00:20:48.100 --> 00:20:52.920 align:middle line:84% We have alums, some people that have done numerous companies 00:20:52.920 --> 00:20:54.920 align:middle line:90% successfully and are back. 00:20:54.920 --> 00:20:57.560 align:middle line:84% We have, I think, some MIT Venture Mentoring Service 00:20:57.560 --> 00:21:00.080 align:middle line:90% people in the audience. 00:21:00.080 --> 00:21:04.240 align:middle line:84% We have people-- I think we have a faculty member or two. 00:21:04.240 --> 00:21:06.200 align:middle line:84% We have people from large companies 00:21:06.200 --> 00:21:09.400 align:middle line:84% who are looking to spin out something. 00:21:09.400 --> 00:21:12.020 align:middle line:84% This all came from when you signed up on the email list. 00:21:12.020 --> 00:21:15.280 align:middle line:84% What are you looking to get out of the course? 00:21:15.280 --> 00:21:18.540 align:middle line:84% So the question is, how do we deal with all of that? 00:21:18.540 --> 00:21:24.700 align:middle line:84% Well, it's MIT, so we have to have an equation. 00:21:24.700 --> 00:21:28.720 align:middle line:84% H equals R divided by E. The goal 00:21:28.720 --> 00:21:33.188 align:middle line:84% is to maximize H. H is happiness. 00:21:33.188 --> 00:21:35.480 align:middle line:84% I know a couple of people have taken the course before. 00:21:35.480 --> 00:21:37.240 align:middle line:90% Don't answer the question. 00:21:37.240 --> 00:21:42.620 align:middle line:84% [LAUGHS] What is R and what is E? 00:21:42.620 --> 00:21:43.835 align:middle line:90% R? 00:21:43.835 --> 00:21:45.020 align:middle line:90% AUDIENCE: Reality? 00:21:45.020 --> 00:21:46.380 align:middle line:90% JOSEPH HADZIMA: Reality? 00:21:46.380 --> 00:21:47.310 align:middle line:90% AUDIENCE: [INAUDIBLE] 00:21:47.310 --> 00:21:48.143 align:middle line:90% JOSEPH HADZIMA: Huh? 00:21:48.143 --> 00:21:51.660 align:middle line:84% AUDIENCE: [INAUDIBLE] how many people [INAUDIBLE] 00:21:51.660 --> 00:21:53.940 align:middle line:90% JOSEPH HADZIMA: [LAUGHS] OK. 00:21:53.940 --> 00:21:56.640 align:middle line:84% Well, typically-- maybe-- this is good. 00:21:56.640 --> 00:21:57.668 align:middle line:90% Reality is the thing. 00:21:57.668 --> 00:21:59.460 align:middle line:84% The first time I did this, the Sloan people 00:21:59.460 --> 00:22:00.980 align:middle line:90% said, oh, it's very easy. 00:22:00.980 --> 00:22:03.800 align:middle line:90% Revenue is R and Expenses are E. 00:22:03.800 --> 00:22:05.260 align:middle line:90% [LAUGHTER] 00:22:05.260 --> 00:22:07.140 align:middle line:84% And I said yeah, that's great, but that's 00:22:07.140 --> 00:22:10.040 align:middle line:90% a subset of this equation. 00:22:10.040 --> 00:22:11.120 align:middle line:90% So R is Reality. 00:22:11.120 --> 00:22:11.840 align:middle line:90% What is E? 00:22:11.840 --> 00:22:14.942 align:middle line:90% 00:22:14.942 --> 00:22:15.900 align:middle line:90% AUDIENCE: Expectations. 00:22:15.900 --> 00:22:17.108 align:middle line:90% JOSEPH HADZIMA: Expectations. 00:22:17.108 --> 00:22:18.700 align:middle line:90% OK. 00:22:18.700 --> 00:22:24.500 align:middle line:84% So you're happy if reality exceeds your expectations, 00:22:24.500 --> 00:22:26.140 align:middle line:90% right? 00:22:26.140 --> 00:22:31.800 align:middle line:84% If you under-promise and over-deliver, are people happy? 00:22:31.800 --> 00:22:37.040 align:middle line:84% If you over-promise and under-deliver, are they happy? 00:22:37.040 --> 00:22:38.640 align:middle line:90% Not as much, right? 00:22:38.640 --> 00:22:42.160 align:middle line:84% So this is a universal principle. 00:22:42.160 --> 00:22:44.700 align:middle line:84% Happiness is reality divided by expectations. 00:22:44.700 --> 00:22:50.760 align:middle line:84% Now, I'm tempted to say I can make you infinitely happy if you 00:22:50.760 --> 00:22:54.052 align:middle line:84% just stop having any expectations for this course. 00:22:54.052 --> 00:22:56.260 align:middle line:84% You have zero expectations, you're going to be happy. 00:22:56.260 --> 00:22:59.440 align:middle line:84% But I know that's not possible because on that email list, 00:22:59.440 --> 00:23:02.913 align:middle line:84% the things you wanted to know about, that E is very high. 00:23:02.913 --> 00:23:04.580 align:middle line:84% And we're going to try to deliver the R, 00:23:04.580 --> 00:23:06.600 align:middle line:84% and I hope at the end you're happy. 00:23:06.600 --> 00:23:10.080 align:middle line:84% We'll come back to that and do a poll at the end. 00:23:10.080 --> 00:23:11.580 align:middle line:90% OK. 00:23:11.580 --> 00:23:12.840 align:middle line:90% So who are we? 00:23:12.840 --> 00:23:19.320 align:middle line:84% Again, we are highly unpaid volunteers who have done this. 00:23:19.320 --> 00:23:21.120 align:middle line:84% And I hate to say it, but the TAs 00:23:21.120 --> 00:23:23.640 align:middle line:84% are the only people getting paid in this course. 00:23:23.640 --> 00:23:25.340 align:middle line:90% And for them, it's nothing. 00:23:25.340 --> 00:23:29.900 align:middle line:84% [LAUGHS] It's like a couple lattes, right? 00:23:29.900 --> 00:23:35.020 align:middle line:84% And now, why would these people come and spend 00:23:35.020 --> 00:23:40.220 align:middle line:84% cold nights in January to talk about this stuff 00:23:40.220 --> 00:23:41.398 align:middle line:90% and not get paid for it? 00:23:41.398 --> 00:23:43.440 align:middle line:84% Well, we're going to have some mugs or something, 00:23:43.440 --> 00:23:45.260 align:middle line:90% but other than that. 00:23:45.260 --> 00:23:48.340 align:middle line:84% Well, because I think if you ask entrepreneurs 00:23:48.340 --> 00:23:51.427 align:middle line:84% who have been successful, especially one successful, 00:23:51.427 --> 00:23:53.260 align:middle line:84% and you've really got them in a quiet moment 00:23:53.260 --> 00:23:55.385 align:middle line:84% with a couple of beers or whatever, and they'd say, 00:23:55.385 --> 00:23:57.940 align:middle line:84% you know, I couldn't have gotten here without a lot help. 00:23:57.940 --> 00:24:00.220 align:middle line:84% And people helped me along the way, 00:24:00.220 --> 00:24:03.708 align:middle line:84% and I want to help the next generation coming by. 00:24:03.708 --> 00:24:05.000 align:middle line:90% And I think that's really true. 00:24:05.000 --> 00:24:08.600 align:middle line:84% There's a real giveback in the entrepreneurial era. 00:24:08.600 --> 00:24:11.340 align:middle line:84% And when you guys succeed, please make sure you're 00:24:11.340 --> 00:24:16.020 align:middle line:84% mentoring and helping entrepreneurs after you. 00:24:16.020 --> 00:24:18.380 align:middle line:90% So a little bit about me. 00:24:18.380 --> 00:24:20.140 align:middle line:84% I've done a bunch of ventures, everything 00:24:20.140 --> 00:24:24.300 align:middle line:84% from being the lawyer, the co-founder, investor, 00:24:24.300 --> 00:24:25.568 align:middle line:90% board member, advisor. 00:24:25.568 --> 00:24:26.860 align:middle line:90% A bunch of different companies. 00:24:26.860 --> 00:24:32.000 align:middle line:84% I'll talk about several of them a little bit later. 00:24:32.000 --> 00:24:35.080 align:middle line:84% I've been a lecturer at Sloan for a long time. 00:24:35.080 --> 00:24:37.760 align:middle line:84% I was a partner at Sullivan and Worcester, 00:24:37.760 --> 00:24:39.060 align:middle line:90% big law firm in Boston. 00:24:39.060 --> 00:24:42.840 align:middle line:84% I founded their High Tech New Ventures group. 00:24:42.840 --> 00:24:46.760 align:middle line:84% I was chairman emeritus at the MIT Enterprise Forum, 00:24:46.760 --> 00:24:48.940 align:middle line:84% which no longer exists in its current form, 00:24:48.940 --> 00:24:53.000 align:middle line:84% but it had 20-some-odd chapters all over the world. 00:24:53.000 --> 00:24:55.000 align:middle line:84% A Director at Main Street Partners 00:24:55.000 --> 00:24:58.440 align:middle line:84% that commercializes technology, and I'm currently 00:24:58.440 --> 00:25:01.700 align:middle line:84% working on two companies, IPVision, 00:25:01.700 --> 00:25:05.140 align:middle line:84% which is an intellectual property analysis firm, 00:25:05.140 --> 00:25:07.040 align:middle line:84% and Neurostim Technologies, which is making 00:25:07.040 --> 00:25:11.720 align:middle line:90% low-cost medical devices. 00:25:11.720 --> 00:25:15.440 align:middle line:84% Now, the most important people you need to know, our TAs. 00:25:15.440 --> 00:25:17.580 align:middle line:90% Janet, hands up. 00:25:17.580 --> 00:25:22.280 align:middle line:84% [LAUGHS] She's a 2026 Sloan candidate. 00:25:22.280 --> 00:25:26.450 align:middle line:84% Deloitte Consulting before that in media and tech. 00:25:26.450 --> 00:25:27.420 align:middle line:90% Psychobiology. 00:25:27.420 --> 00:25:28.670 align:middle line:90% I don't want to mess with you. 00:25:28.670 --> 00:25:30.610 align:middle line:90% [LAUGHTER] 00:25:30.610 --> 00:25:35.450 align:middle line:84% And Head of Operations at the MIT $100K Competition. 00:25:35.450 --> 00:25:38.330 align:middle line:84% There's a big connection between the $100K Competition and this 00:25:38.330 --> 00:25:38.950 align:middle line:90% class. 00:25:38.950 --> 00:25:41.667 align:middle line:84% The class was actually formed to see if we could help people 00:25:41.667 --> 00:25:44.250 align:middle line:84% entering the competition have more of an understanding of what 00:25:44.250 --> 00:25:47.530 align:middle line:84% a venture was and not what just ideas were. 00:25:47.530 --> 00:25:51.890 align:middle line:84% So tomorrow night, Janet and Supriya will present a little 00:25:51.890 --> 00:25:53.390 align:middle line:90% bit about the 100K. 00:25:53.390 --> 00:25:55.730 align:middle line:84% Hopefully, you'll be interested in it. 00:25:55.730 --> 00:25:57.210 align:middle line:90% Supriya. 00:25:57.210 --> 00:25:58.450 align:middle line:90% Yep. 00:25:58.450 --> 00:26:00.370 align:middle line:90% 2026 also. 00:26:00.370 --> 00:26:05.050 align:middle line:84% Software engineer at Amazon Web Services in gaming. 00:26:05.050 --> 00:26:05.830 align:middle line:90% That's good. 00:26:05.830 --> 00:26:10.290 align:middle line:84% [LAUGHS] Was a Fulbright-Nehru scholar 00:26:10.290 --> 00:26:12.830 align:middle line:90% and co-founded a company there. 00:26:12.830 --> 00:26:15.290 align:middle line:84% And she's the Incoming Managing Director of the $100K 00:26:15.290 --> 00:26:16.403 align:middle line:90% Competition. 00:26:16.403 --> 00:26:18.570 align:middle line:84% So you've probably already been in contact with them 00:26:18.570 --> 00:26:20.570 align:middle line:84% on a lot of logistical questions, 00:26:20.570 --> 00:26:22.590 align:middle line:84% and they've done a great job so far. 00:26:22.590 --> 00:26:24.910 align:middle line:84% If they don't, let me know and I'll-- 00:26:24.910 --> 00:26:25.730 align:middle line:90% don't tell me. 00:26:25.730 --> 00:26:26.250 align:middle line:90% Tell them. 00:26:26.250 --> 00:26:30.060 align:middle line:90% [LAUGHS] OK. 00:26:30.060 --> 00:26:32.990 align:middle line:84% And I'll introduce the presenters 00:26:32.990 --> 00:26:35.170 align:middle line:90% when they present going forward. 00:26:35.170 --> 00:26:35.670 align:middle line:90% OK. 00:26:35.670 --> 00:26:38.310 align:middle line:90% Now, new ventures. 00:26:38.310 --> 00:26:41.190 align:middle line:84% I said it wasn't about theory, but I 00:26:41.190 --> 00:26:44.470 align:middle line:84% wanted to leave you with three or four things 00:26:44.470 --> 00:26:47.950 align:middle line:84% to think about as you're looking at the nuts and bolts of each 00:26:47.950 --> 00:26:50.990 align:middle line:84% of the areas we're going to talk about, sort of some things 00:26:50.990 --> 00:26:55.350 align:middle line:84% to think about and help you digest it. 00:26:55.350 --> 00:27:00.250 align:middle line:84% So the first one is my basic, very simple concept. 00:27:00.250 --> 00:27:05.510 align:middle line:84% Now in entrepreneurship, the questions are really simple. 00:27:05.510 --> 00:27:08.310 align:middle line:90% The answers are not. 00:27:08.310 --> 00:27:11.490 align:middle line:84% That's the real key, if you know what questions to ask. 00:27:11.490 --> 00:27:13.390 align:middle line:90% Finding the answer is hard. 00:27:13.390 --> 00:27:16.357 align:middle line:84% But if you do that correctly, you'll be a success. 00:27:16.357 --> 00:27:17.690 align:middle line:90% So what do you need for success? 00:27:17.690 --> 00:27:20.970 align:middle line:84% Well, the first thing you do is you have to create value, 00:27:20.970 --> 00:27:23.330 align:middle line:84% because if you don't create value, 00:27:23.330 --> 00:27:26.350 align:middle line:90% you don't have anything, right? 00:27:26.350 --> 00:27:31.530 align:middle line:84% Now, there's a lot behind that like, what kind of value? 00:27:31.530 --> 00:27:34.650 align:middle line:84% For whom am I creating the value? 00:27:34.650 --> 00:27:37.290 align:middle line:90% How much value do I create? 00:27:37.290 --> 00:27:40.250 align:middle line:84% What does it cost me to create that value? 00:27:40.250 --> 00:27:42.903 align:middle line:84% How often do people want that value? 00:27:42.903 --> 00:27:43.570 align:middle line:90% A lot of things. 00:27:43.570 --> 00:27:45.850 align:middle line:84% We're going to talk about all that stuff. 00:27:45.850 --> 00:27:47.490 align:middle line:90% So create value. 00:27:47.490 --> 00:27:50.150 align:middle line:84% But if you create value and that's it, 00:27:50.150 --> 00:27:51.650 align:middle line:84% you don't have a successful venture, 00:27:51.650 --> 00:27:55.690 align:middle line:84% because you've got to capture some of that value 00:27:55.690 --> 00:27:56.810 align:middle line:90% so you can do it again. 00:27:56.810 --> 00:28:02.850 align:middle line:84% In the for-profit world, that's eventually profit and cash flow. 00:28:02.850 --> 00:28:08.130 align:middle line:84% In the not-for-profit world, it can be creating enough interest 00:28:08.130 --> 00:28:11.090 align:middle line:84% that you can get other people to give you resources. 00:28:11.090 --> 00:28:13.530 align:middle line:84% It's the model that you're going to create 00:28:13.530 --> 00:28:16.290 align:middle line:84% that will allow you to capture some value that you create. 00:28:16.290 --> 00:28:16.950 align:middle line:90% Real simple. 00:28:16.950 --> 00:28:19.450 align:middle line:90% Create value, harvest value. 00:28:19.450 --> 00:28:22.150 align:middle line:84% So that's one way to think about the things you're going to look 00:28:22.150 --> 00:28:25.910 align:middle line:90% at during the six sessions. 00:28:25.910 --> 00:28:27.910 align:middle line:84% Now, another way to look at it is what 00:28:27.910 --> 00:28:31.230 align:middle line:90% I've called the three whys. 00:28:31.230 --> 00:28:34.470 align:middle line:84% I've looked at probably several thousand business 00:28:34.470 --> 00:28:37.270 align:middle line:84% plans over the years and heard pitches, 00:28:37.270 --> 00:28:41.630 align:middle line:84% and I've talked to investors about what they're looking for, 00:28:41.630 --> 00:28:44.570 align:middle line:84% and I've talked to founders and other things. 00:28:44.570 --> 00:28:48.430 align:middle line:84% And I think it boils down to three basic why questions. 00:28:48.430 --> 00:28:51.750 align:middle line:90% The first is, why this? 00:28:51.750 --> 00:28:55.950 align:middle line:84% Why is this idea that you're telling me about worth doing 00:28:55.950 --> 00:28:58.110 align:middle line:90% or investing in? 00:28:58.110 --> 00:29:00.030 align:middle line:90% Why? 00:29:00.030 --> 00:29:02.430 align:middle line:90% Is it the size of the market? 00:29:02.430 --> 00:29:05.870 align:middle line:90% Is it a problem worth solving? 00:29:05.870 --> 00:29:10.410 align:middle line:84% Amy Smith entered the $100K Competition probably-- 00:29:10.410 --> 00:29:13.230 align:middle line:90% I don't know-- 15 years ago. 00:29:13.230 --> 00:29:15.130 align:middle line:84% And she was at the Edgerton Center. 00:29:15.130 --> 00:29:19.770 align:middle line:84% Amy was big on the developing world, and D-Lab, I think, 00:29:19.770 --> 00:29:21.530 align:middle line:90% was part of what she did. 00:29:21.530 --> 00:29:23.810 align:middle line:84% And she got into the finals of the 100K, 00:29:23.810 --> 00:29:26.430 align:middle line:84% and she got up on Kresge at the big auditorium. 00:29:26.430 --> 00:29:28.110 align:middle line:90% And I remember her pitch. 00:29:28.110 --> 00:29:30.050 align:middle line:90% It went like this. 00:29:30.050 --> 00:29:34.490 align:middle line:84% She said, 1.9 billion people on the planet 00:29:34.490 --> 00:29:38.330 align:middle line:84% don't have access to clean water. 00:29:38.330 --> 00:29:39.690 align:middle line:90% I mean, I was clueless. 00:29:39.690 --> 00:29:40.510 align:middle line:90% You're kidding me. 00:29:40.510 --> 00:29:41.870 align:middle line:90% 1.9 billion people? 00:29:41.870 --> 00:29:44.250 align:middle line:90% That's a big problem. 00:29:44.250 --> 00:29:47.850 align:middle line:84% The only way to test for biological contamination 00:29:47.850 --> 00:29:51.890 align:middle line:84% is to incubate a sample of water. 00:29:51.890 --> 00:29:53.890 align:middle line:84% The only incubators in the market today 00:29:53.890 --> 00:29:57.250 align:middle line:90% are powered by electricity. 00:29:57.250 --> 00:30:01.150 align:middle line:84% The 1.9 billion people that don't have access to clean water 00:30:01.150 --> 00:30:05.410 align:middle line:84% by and large don't have access to electricity. 00:30:05.410 --> 00:30:09.250 align:middle line:84% I've got an incubator that doesn't require electricity. 00:30:09.250 --> 00:30:11.690 align:middle line:90% Would you like to hear more? 00:30:11.690 --> 00:30:13.930 align:middle line:90% Big problem, right? 00:30:13.930 --> 00:30:15.670 align:middle line:84% Now, that's something I can get behind. 00:30:15.670 --> 00:30:19.890 align:middle line:84% [LAUGHS] She went on and did a bunch of things. 00:30:19.890 --> 00:30:23.022 align:middle line:84% Eventually won a MacArthur Genius Award. 00:30:23.022 --> 00:30:24.730 align:middle line:84% I haven't talked to her in several years, 00:30:24.730 --> 00:30:26.355 align:middle line:84% so I hope she's all right, but I just-- 00:30:26.355 --> 00:30:29.530 align:middle line:84% it was so riveting, her presentation. 00:30:29.530 --> 00:30:30.770 align:middle line:90% So why this? 00:30:30.770 --> 00:30:31.970 align:middle line:90% Why is this a big idea? 00:30:31.970 --> 00:30:33.970 align:middle line:84% Why is this worth spending your time? 00:30:33.970 --> 00:30:38.450 align:middle line:84% Or if you're an investor, why would I put my money behind you? 00:30:38.450 --> 00:30:40.470 align:middle line:84% Or if you're trying to get me to come on board 00:30:40.470 --> 00:30:44.030 align:middle line:84% and be part of your team, why would I want to join the team? 00:30:44.030 --> 00:30:45.750 align:middle line:90% Why this? 00:30:45.750 --> 00:30:48.870 align:middle line:90% The second why, why now? 00:30:48.870 --> 00:30:52.310 align:middle line:84% Why is now the right time to do this? 00:30:52.310 --> 00:30:55.390 align:middle line:84% Well, sometimes it can be the convergence 00:30:55.390 --> 00:30:58.710 align:middle line:90% of opportunity and solution. 00:30:58.710 --> 00:31:04.510 align:middle line:84% So one of the contestants in the 100K back in the day had 00:31:04.510 --> 00:31:09.030 align:middle line:84% an elegant plan for fixing the defects in the air traffic 00:31:09.030 --> 00:31:11.550 align:middle line:84% control system in the United States. 00:31:11.550 --> 00:31:13.990 align:middle line:84% I mean, it was really quite well done. 00:31:13.990 --> 00:31:15.450 align:middle line:84% And the judges were there saying, 00:31:15.450 --> 00:31:17.890 align:middle line:84% well, that's all fine and good, but you know, 00:31:17.890 --> 00:31:21.070 align:middle line:84% [LAUGHS] you can't just fix part of it. 00:31:21.070 --> 00:31:23.330 align:middle line:84% You've got to fix the whole system. 00:31:23.330 --> 00:31:25.790 align:middle line:84% And they looked at us and they said, well, 00:31:25.790 --> 00:31:27.530 align:middle line:84% didn't you know that the FAA has put 00:31:27.530 --> 00:31:30.010 align:middle line:84% out a request for a proposal for a new air traffic control 00:31:30.010 --> 00:31:31.850 align:middle line:90% system? 00:31:31.850 --> 00:31:32.650 align:middle line:90% No. 00:31:32.650 --> 00:31:34.530 align:middle line:90% You didn't tell us that. 00:31:34.530 --> 00:31:36.550 align:middle line:90% Well, now we have a timing. 00:31:36.550 --> 00:31:38.170 align:middle line:90% Why now? 00:31:38.170 --> 00:31:40.950 align:middle line:84% Somebody wants this now, and we've got the solution. 00:31:40.950 --> 00:31:44.570 align:middle line:84% If they had had that solution five years before or after 00:31:44.570 --> 00:31:48.030 align:middle line:84% the new system was put in place, even though it's a great idea, 00:31:48.030 --> 00:31:50.410 align:middle line:84% it may not be the right time to do it. 00:31:50.410 --> 00:31:51.230 align:middle line:90% So why this? 00:31:51.230 --> 00:31:52.330 align:middle line:90% Why now? 00:31:52.330 --> 00:31:55.010 align:middle line:90% The third why, why this team? 00:31:55.010 --> 00:31:59.770 align:middle line:84% Why do we think these people will win? 00:31:59.770 --> 00:32:01.050 align:middle line:90% Great idea. 00:32:01.050 --> 00:32:02.050 align:middle line:90% Good timing. 00:32:02.050 --> 00:32:03.410 align:middle line:90% Why these people? 00:32:03.410 --> 00:32:06.532 align:middle line:84% Well, it could be prior experience, 00:32:06.532 --> 00:32:07.990 align:middle line:84% although that doesn't always count. 00:32:07.990 --> 00:32:11.010 align:middle line:84% There was a company back in my law days that I represented 00:32:11.010 --> 00:32:13.330 align:middle line:90% called Encore Computer. 00:32:13.330 --> 00:32:16.510 align:middle line:84% And Encore was founded by the technical founders 00:32:16.510 --> 00:32:20.150 align:middle line:84% of Digital Equipment Corporation, Prime Computer, 00:32:20.150 --> 00:32:21.170 align:middle line:90% and Data General. 00:32:21.170 --> 00:32:24.775 align:middle line:84% The three biggest minicomputer companies at the time 00:32:24.775 --> 00:32:26.150 align:middle line:84% got together, and they were going 00:32:26.150 --> 00:32:29.190 align:middle line:84% to make a new generation of computers. 00:32:29.190 --> 00:32:33.050 align:middle line:84% Prior experience, out of the park amount. 00:32:33.050 --> 00:32:34.010 align:middle line:90% Did they succeed? 00:32:34.010 --> 00:32:35.150 align:middle line:90% No. 00:32:35.150 --> 00:32:36.750 align:middle line:90% A bunch of issues there. 00:32:36.750 --> 00:32:39.995 align:middle line:84% But prior experience got them funded. 00:32:39.995 --> 00:32:41.870 align:middle line:84% But if you're a starting entrepreneur and you 00:32:41.870 --> 00:32:46.662 align:middle line:84% don't have prior experience, how do you 00:32:46.662 --> 00:32:47.870 align:middle line:90% show that this team is right? 00:32:47.870 --> 00:32:50.090 align:middle line:84% Well, it be a compelling model you have. 00:32:50.090 --> 00:32:53.830 align:middle line:84% It could be the people you attract around you. 00:32:53.830 --> 00:32:54.910 align:middle line:90% OK? 00:32:54.910 --> 00:32:56.110 align:middle line:90% So why now? 00:32:56.110 --> 00:32:56.690 align:middle line:90% Why this? 00:32:56.690 --> 00:32:57.210 align:middle line:90% Why now? 00:32:57.210 --> 00:32:59.190 align:middle line:90% Why this team? 00:32:59.190 --> 00:33:02.110 align:middle line:84% And then the fourth question that comes up. 00:33:02.110 --> 00:33:04.550 align:middle line:90% Why won't this work? 00:33:04.550 --> 00:33:07.590 align:middle line:84% Now, salespeople will tell you when the prospect starts 00:33:07.590 --> 00:33:11.070 align:middle line:84% asking you a bunch of questions about the limits of the thing 00:33:11.070 --> 00:33:16.007 align:middle line:84% you're trying to sell, they know they've got you on a hook, 00:33:16.007 --> 00:33:17.090 align:middle line:90% because you're interested. 00:33:17.090 --> 00:33:18.970 align:middle line:90% You're trying to test it out. 00:33:18.970 --> 00:33:21.210 align:middle line:84% So this fourth one is if you don't 00:33:21.210 --> 00:33:23.600 align:middle line:84% get through the first three, you won't get to the fourth. 00:33:23.600 --> 00:33:25.850 align:middle line:84% This is where you've got to start thinking about, what 00:33:25.850 --> 00:33:29.610 align:middle line:84% are the risks in what I'm doing, and how do I de-risk it? 00:33:29.610 --> 00:33:32.530 align:middle line:90% How do I anticipate things? 00:33:32.530 --> 00:33:34.323 align:middle line:90% What's my plan B? 00:33:34.323 --> 00:33:35.990 align:middle line:84% So that's another way to think about it. 00:33:35.990 --> 00:33:41.050 align:middle line:84% So we had the first concept, create value, capture value. 00:33:41.050 --> 00:33:44.010 align:middle line:84% The three why concepts for you to think about as you 00:33:44.010 --> 00:33:47.330 align:middle line:90% look at ventures. 00:33:47.330 --> 00:33:50.330 align:middle line:84% Now I'm going to do some lesson learned from things that I 00:33:50.330 --> 00:33:53.730 align:middle line:84% actually worked on that would hopefully 00:33:53.730 --> 00:33:57.290 align:middle line:84% give you some ideas about how to look at things. 00:33:57.290 --> 00:33:59.200 align:middle line:84% And there are four critical components 00:33:59.200 --> 00:34:01.450 align:middle line:84% that I've distilled from thinking about all the things 00:34:01.450 --> 00:34:02.950 align:middle line:90% I've worked on over the years. 00:34:02.950 --> 00:34:06.010 align:middle line:90% 00:34:06.010 --> 00:34:07.630 align:middle line:90% They're ideas. 00:34:07.630 --> 00:34:09.909 align:middle line:84% You need all of these components together. 00:34:09.909 --> 00:34:11.750 align:middle line:90% You need ideas. 00:34:11.750 --> 00:34:15.030 align:middle line:90% You need to be able to execute. 00:34:15.030 --> 00:34:17.469 align:middle line:84% You have to get the timing right, 00:34:17.469 --> 00:34:19.750 align:middle line:84% and you've got to get the people right. 00:34:19.750 --> 00:34:22.150 align:middle line:84% And if you do all of that, that's 00:34:22.150 --> 00:34:25.350 align:middle line:84% probably your 10% success right there. 00:34:25.350 --> 00:34:26.830 align:middle line:90% And maybe it's bigger. 00:34:26.830 --> 00:34:29.310 align:middle line:84% But if you don't get all of those things aligned, 00:34:29.310 --> 00:34:31.590 align:middle line:84% you're going to have a hard time. 00:34:31.590 --> 00:34:36.310 align:middle line:84% So let's look at it in a little bit more detail. 00:34:36.310 --> 00:34:37.870 align:middle line:90% Ideas. 00:34:37.870 --> 00:34:41.497 align:middle line:84% You've got to have something, but ideas are a dime a dozen. 00:34:41.497 --> 00:34:42.830 align:middle line:90% That's an expression people use. 00:34:42.830 --> 00:34:45.310 align:middle line:84% Around MIT, there are ideas all over the place, everything 00:34:45.310 --> 00:34:51.110 align:middle line:84% from genomics to AI to nanotechnology 00:34:51.110 --> 00:34:52.850 align:middle line:90% to latest drug-type stuff. 00:34:52.850 --> 00:34:54.510 align:middle line:90% They're all over the place. 00:34:54.510 --> 00:34:56.670 align:middle line:84% The question is, is it a valuable idea, 00:34:56.670 --> 00:34:58.630 align:middle line:90% or can it be made valuable? 00:34:58.630 --> 00:35:04.510 align:middle line:84% And the question is, to whom is this idea valuable? 00:35:04.510 --> 00:35:05.570 align:middle line:90% And how much value? 00:35:05.570 --> 00:35:11.560 align:middle line:84% This is, again, riffing on that create value concept. 00:35:11.560 --> 00:35:14.800 align:middle line:84% And then finally, is it easily copied? 00:35:14.800 --> 00:35:18.400 align:middle line:84% Because if I have a great idea but anyone can do it, 00:35:18.400 --> 00:35:20.800 align:middle line:84% that may be still something you want to do. 00:35:20.800 --> 00:35:23.640 align:middle line:90% Maybe that's open source stuff. 00:35:23.640 --> 00:35:26.960 align:middle line:84% But you can't build a venture around that very well, 00:35:26.960 --> 00:35:30.400 align:middle line:84% so you have to have some good ideas. 00:35:30.400 --> 00:35:34.400 align:middle line:90% The second component, execution. 00:35:34.400 --> 00:35:36.960 align:middle line:90% Thomas Edison. 00:35:36.960 --> 00:35:40.400 align:middle line:84% "Vision without execution is hallucination." 00:35:40.400 --> 00:35:45.760 align:middle line:84% Now, Edison, and the modern-day Edison, Dyson, spent-- 00:35:45.760 --> 00:35:48.500 align:middle line:84% how many experiments did they run to try to figure out? 00:35:48.500 --> 00:35:50.495 align:middle line:84% In Edison's case, it was to trying 00:35:50.495 --> 00:35:52.620 align:middle line:84% to find a filament that would work as a light bulb. 00:35:52.620 --> 00:35:55.520 align:middle line:84% And eventually, it was bamboo, of all things. 00:35:55.520 --> 00:35:57.300 align:middle line:84% And Dyson, I don't know what it is, 00:35:57.300 --> 00:36:00.560 align:middle line:84% but he talked about finding the 10,000 ways things 00:36:00.560 --> 00:36:01.840 align:middle line:90% didn't happen. 00:36:01.840 --> 00:36:05.680 align:middle line:84% But execution on that idea is key. 00:36:05.680 --> 00:36:07.320 align:middle line:84% I'm going to tell you about two deals 00:36:07.320 --> 00:36:13.700 align:middle line:84% that I passed on because I had concerns about their execution. 00:36:13.700 --> 00:36:15.060 align:middle line:90% The first is ZipCar. 00:36:15.060 --> 00:36:17.300 align:middle line:90% People heard of ZipCar? 00:36:17.300 --> 00:36:17.800 align:middle line:90% OK. 00:36:17.800 --> 00:36:21.700 align:middle line:84% So ZipCar was a concept that, I don't need to own a car. 00:36:21.700 --> 00:36:23.200 align:middle line:84% If I want to get from here to there, 00:36:23.200 --> 00:36:25.200 align:middle line:84% I want to-- there's a lot of things I can do. 00:36:25.200 --> 00:36:27.180 align:middle line:90% I can own a car. 00:36:27.180 --> 00:36:28.520 align:middle line:90% I can get a cab. 00:36:28.520 --> 00:36:31.300 align:middle line:84% I can rent a car for a day or a week. 00:36:31.300 --> 00:36:34.860 align:middle line:84% But what if I could rent a car for an hour or two? 00:36:34.860 --> 00:36:38.460 align:middle line:84% That's a fundamental break in how transportation is done. 00:36:38.460 --> 00:36:40.960 align:middle line:90% And they came and they talked. 00:36:40.960 --> 00:36:43.600 align:middle line:84% And I said, well, tell me about it. 00:36:43.600 --> 00:36:46.020 align:middle line:84% Oh, we're going to have this thing. 00:36:46.020 --> 00:36:48.540 align:middle line:84% We're going to have an app, and you can-- 00:36:48.540 --> 00:36:52.700 align:middle line:84% you'll see a car in a parking space on 6th Street. 00:36:52.700 --> 00:36:54.740 align:middle line:84% You'll swipe it, you'll do this, and then 00:36:54.740 --> 00:36:58.000 align:middle line:84% you can do it and take it back, and it's going to work that way. 00:36:58.000 --> 00:36:59.542 align:middle line:90% I said, OK. 00:36:59.542 --> 00:37:01.000 align:middle line:84% Well, where are you going to start? 00:37:01.000 --> 00:37:03.500 align:middle line:84% Oh, we're going to start in Cambridge. 00:37:03.500 --> 00:37:05.980 align:middle line:90% I said, in Cambridge? 00:37:05.980 --> 00:37:10.000 align:middle line:84% I said, you clearly don't know the story 00:37:10.000 --> 00:37:15.760 align:middle line:84% about recruiting faculty in Cambridge 00:37:15.760 --> 00:37:19.322 align:middle line:84% where they say to the faculty, the would-be faculty member, 00:37:19.322 --> 00:37:20.780 align:middle line:84% I'm going to give you three things. 00:37:20.780 --> 00:37:23.080 align:middle line:90% You can pick one of them. 00:37:23.080 --> 00:37:27.880 align:middle line:84% We can give you tenure, we can give you the Nobel Prize, 00:37:27.880 --> 00:37:30.640 align:middle line:90% or we can give you parking. 00:37:30.640 --> 00:37:33.520 align:middle line:84% And the smart ones say, I'll take the parking, 00:37:33.520 --> 00:37:35.780 align:middle line:84% because if I have parking, I can get to work 00:37:35.780 --> 00:37:38.460 align:middle line:84% and I can figure out how to get tenure and the Nobel Prize. 00:37:38.460 --> 00:37:41.080 align:middle line:84% Parking is a big deal in Cambridge. 00:37:41.080 --> 00:37:43.720 align:middle line:84% And if you've got to do that in every single city, 00:37:43.720 --> 00:37:46.800 align:middle line:90% that's a major execution thing. 00:37:46.800 --> 00:37:49.640 align:middle line:84% I don't understand how you're going to do it. 00:37:49.640 --> 00:37:52.520 align:middle line:84% And I said, I wish you well, but I'm just not going 00:37:52.520 --> 00:37:54.120 align:middle line:90% to be on that journey with you. 00:37:54.120 --> 00:37:56.840 align:middle line:84% Now, it turned out they did eventually, I think, go public. 00:37:56.840 --> 00:37:58.480 align:middle line:90% It was a hard slog. 00:37:58.480 --> 00:38:00.200 align:middle line:84% The founders might have felt good 00:38:00.200 --> 00:38:04.040 align:middle line:84% that they changed a fundamental part of transportation, 00:38:04.040 --> 00:38:06.560 align:middle line:84% but in terms of their personal economic reward, 00:38:06.560 --> 00:38:08.620 align:middle line:84% it wasn't very much at the end of the day. 00:38:08.620 --> 00:38:11.420 align:middle line:84% But that's OK if I go back to the questions of, 00:38:11.420 --> 00:38:14.060 align:middle line:84% what am I looking for, if that works for you. 00:38:14.060 --> 00:38:18.340 align:middle line:84% But it didn't work for me to join them on that journey. 00:38:18.340 --> 00:38:22.060 align:middle line:84% The second one was a precursor to eBay. 00:38:22.060 --> 00:38:26.188 align:middle line:84% It wasn't eBay, but the same concept that I saw before eBay. 00:38:26.188 --> 00:38:27.980 align:middle line:84% And I listened to them, and I said, OK, let 00:38:27.980 --> 00:38:29.280 align:middle line:90% me see if I can boil this down. 00:38:29.280 --> 00:38:32.580 align:middle line:84% I'm going to buy something sight unseen from somebody 00:38:32.580 --> 00:38:37.980 align:middle line:84% I've never met, and nobody's standing behind the transaction. 00:38:37.980 --> 00:38:42.260 align:middle line:84% Boy, that sounds like it could be fraught with fraud. 00:38:42.260 --> 00:38:45.900 align:middle line:84% I don't quite figure out how you're going to do it, 00:38:45.900 --> 00:38:47.400 align:middle line:90% and so I'm going to pass on it. 00:38:47.400 --> 00:38:49.960 align:middle line:90% Well, eBay itself got going. 00:38:49.960 --> 00:38:52.700 align:middle line:84% And there's a great story about PEZ dispensers 00:38:52.700 --> 00:38:54.560 align:middle line:84% and all that stuff if you read about it. 00:38:54.560 --> 00:38:56.600 align:middle line:84% And eventually, they did have fraud. 00:38:56.600 --> 00:38:58.480 align:middle line:84% They did figure out how to get insurance. 00:38:58.480 --> 00:39:00.780 align:middle line:84% But the point is, there were a lot of execution things 00:39:00.780 --> 00:39:03.640 align:middle line:84% that were very difficult for me to understand, 00:39:03.640 --> 00:39:07.000 align:middle line:84% and I didn't think that I could help them on that journey. 00:39:07.000 --> 00:39:09.980 align:middle line:84% So that was two examples of execution issues. 00:39:09.980 --> 00:39:12.520 align:middle line:90% 00:39:12.520 --> 00:39:17.360 align:middle line:84% Now, MIT, this is right at the heart of MIT. 00:39:17.360 --> 00:39:19.840 align:middle line:90% Ideas plus execution. 00:39:19.840 --> 00:39:22.520 align:middle line:84% The motto of MIT is "mens et manus." 00:39:22.520 --> 00:39:24.640 align:middle line:90% "Mind and hands." 00:39:24.640 --> 00:39:28.840 align:middle line:84% So this is not unknown that you need ideas 00:39:28.840 --> 00:39:30.600 align:middle line:90% and you need to execute. 00:39:30.600 --> 00:39:33.560 align:middle line:90% But those two are not-- 00:39:33.560 --> 00:39:36.720 align:middle line:84% they're necessary, but they're not sufficient for success, 00:39:36.720 --> 00:39:41.200 align:middle line:84% because you need the other two pieces. 00:39:41.200 --> 00:39:43.640 align:middle line:90% And timing. 00:39:43.640 --> 00:39:47.400 align:middle line:84% "I've lost more money and time being ahead of the curve." 00:39:47.400 --> 00:39:51.460 align:middle line:84% This is a quote from somebody you know, me. 00:39:51.460 --> 00:39:55.980 align:middle line:84% [LAUGHS] Fortunately, I've been able to catch some waves, 00:39:55.980 --> 00:39:56.980 align:middle line:90% and I've done all right. 00:39:56.980 --> 00:39:58.525 align:middle line:90% I'm not complaining. 00:39:58.525 --> 00:40:00.400 align:middle line:84% But I've crashed and burned a lot of the time 00:40:00.400 --> 00:40:04.760 align:middle line:84% because I was ahead of the curve in thinking about stuff. 00:40:04.760 --> 00:40:07.540 align:middle line:90% 00:40:07.540 --> 00:40:10.200 align:middle line:84% It can take-- this is especially for technology ventures. 00:40:10.200 --> 00:40:14.500 align:middle line:84% It can take a long time to be an overnight success. 00:40:14.500 --> 00:40:16.240 align:middle line:90% Nvidia, three decades. 00:40:16.240 --> 00:40:19.380 align:middle line:90% 00:40:19.380 --> 00:40:22.660 align:middle line:90% 3D printing over 25 years. 00:40:22.660 --> 00:40:25.100 align:middle line:84% The last night of the course, Marina Hatsopoulos 00:40:25.100 --> 00:40:27.543 align:middle line:84% is going to come and talk about some things 00:40:27.543 --> 00:40:28.960 align:middle line:84% that she's learned over the years. 00:40:28.960 --> 00:40:31.040 align:middle line:84% She was one of the founders of Z Corp, 00:40:31.040 --> 00:40:34.980 align:middle line:84% which was one of the first 3D printing companies. 00:40:34.980 --> 00:40:38.380 align:middle line:84% And a couple of years ago, I was at an investment conference, 00:40:38.380 --> 00:40:41.080 align:middle line:84% and someone came up and said, you do stuff at MIT. 00:40:41.080 --> 00:40:42.500 align:middle line:90% Yeah, yeah, I do. 00:40:42.500 --> 00:40:45.460 align:middle line:84% They said, tell me about this new 3D printing. 00:40:45.460 --> 00:40:48.220 align:middle line:90% And I said, it's not new. 00:40:48.220 --> 00:40:52.420 align:middle line:84% The patents have expired, the original patents. 00:40:52.420 --> 00:40:54.880 align:middle line:84% What has happened is in the last few years, 00:40:54.880 --> 00:40:57.700 align:middle line:84% there have been advances in material science, 00:40:57.700 --> 00:41:02.560 align:middle line:84% in sensor technology, and in microelectronics that have now 00:41:02.560 --> 00:41:05.840 align:middle line:84% made some of this stuff work beyond the simple area of 3D 00:41:05.840 --> 00:41:09.160 align:middle line:84% printing so we can do more broader things. 00:41:09.160 --> 00:41:12.640 align:middle line:84% The point is, it took a number of years for all the ancillary 00:41:12.640 --> 00:41:15.920 align:middle line:84% pieces of technology to come together to really make 3D 00:41:15.920 --> 00:41:18.140 align:middle line:90% printing what it is today. 00:41:18.140 --> 00:41:21.160 align:middle line:84% And it's even-- the jury's out whether it's really 00:41:21.160 --> 00:41:22.100 align:middle line:90% that successful. 00:41:22.100 --> 00:41:23.780 align:middle line:84% There have been-- if you follow the news on this, 00:41:23.780 --> 00:41:26.400 align:middle line:84% there have been a lot of strain among some of the 3D printing 00:41:26.400 --> 00:41:29.800 align:middle line:90% companies that have gone public. 00:41:29.800 --> 00:41:33.600 align:middle line:90% Another example is Prodigy. 00:41:33.600 --> 00:41:35.820 align:middle line:84% I doubt any of you have heard of Prodigy. 00:41:35.820 --> 00:41:37.640 align:middle line:90% Anybody? 00:41:37.640 --> 00:41:39.960 align:middle line:90% Oh, a couple of historians here. 00:41:39.960 --> 00:41:41.580 align:middle line:84% Well, Prodigy was a joint venture. 00:41:41.580 --> 00:41:43.540 align:middle line:84% It was one of the first online things. 00:41:43.540 --> 00:41:46.680 align:middle line:84% It was a joint venture between CompuServe 00:41:46.680 --> 00:41:48.528 align:middle line:90% and Sears and Roebuck. 00:41:48.528 --> 00:41:50.320 align:middle line:84% And one of the things they were going to do 00:41:50.320 --> 00:41:52.445 align:middle line:84% was they were going to do on-- you were going to be 00:41:52.445 --> 00:41:54.760 align:middle line:90% able to go online and shop. 00:41:54.760 --> 00:41:58.000 align:middle line:84% And back then, they didn't have-- 00:41:58.000 --> 00:42:01.220 align:middle line:84% the browsers weren't anywhere near what they are today. 00:42:01.220 --> 00:42:03.500 align:middle line:84% They spent more than $1 billion trying 00:42:03.500 --> 00:42:06.060 align:middle line:84% to get that concept of the ground. 00:42:06.060 --> 00:42:09.420 align:middle line:84% And that's when $1 billion was real money. 00:42:09.420 --> 00:42:10.840 align:middle line:90% I guess it's still real money. 00:42:10.840 --> 00:42:11.500 align:middle line:90% [LAUGHS] 00:42:11.500 --> 00:42:15.060 align:middle line:84% But today, how many people have bought something at Amazon? 00:42:15.060 --> 00:42:16.560 align:middle line:90% And don't raise your hand. 00:42:16.560 --> 00:42:18.740 align:middle line:84% I know you all have in the last month. 00:42:18.740 --> 00:42:23.372 align:middle line:84% That's here today, but it took a long time for that to happen. 00:42:23.372 --> 00:42:25.580 align:middle line:84% The other one-- and this has a double meaning on it-- 00:42:25.580 --> 00:42:27.740 align:middle line:90% is fusion. 00:42:27.740 --> 00:42:30.900 align:middle line:84% People have been working on fusion for generating 00:42:30.900 --> 00:42:34.100 align:middle line:90% electricity for 50-plus years. 00:42:34.100 --> 00:42:36.820 align:middle line:84% Now recently, there have been some advances, or at least 00:42:36.820 --> 00:42:37.760 align:middle line:90% people investing. 00:42:37.760 --> 00:42:40.820 align:middle line:84% There's Commonwealth Fusion here in Massachusetts. 00:42:40.820 --> 00:42:44.540 align:middle line:84% Big bucks by people like Bill Gates, et cetera. 00:42:44.540 --> 00:42:47.040 align:middle line:84% One of the problems with something like fusion-- 00:42:47.040 --> 00:42:49.180 align:middle line:84% and I call it my fusion problem-- 00:42:49.180 --> 00:42:53.760 align:middle line:84% is fusion doesn't work unless all of it works. 00:42:53.760 --> 00:42:56.860 align:middle line:84% It's not like 3D printing where you could make a little thing 00:42:56.860 --> 00:42:59.920 align:middle line:84% and do a little prototyping with a 3D printer. 00:42:59.920 --> 00:43:01.540 align:middle line:90% It either works, or it doesn't. 00:43:01.540 --> 00:43:03.080 align:middle line:84% And if you're going down and looking 00:43:03.080 --> 00:43:07.760 align:middle line:84% at a venture that requires all of the pieces to come together, 00:43:07.760 --> 00:43:10.040 align:middle line:90% that's a risky proposition. 00:43:10.040 --> 00:43:13.040 align:middle line:84% And things like fusion, that's where the government 00:43:13.040 --> 00:43:17.360 align:middle line:84% long-term investment should be, to provide the stability 00:43:17.360 --> 00:43:19.160 align:middle line:90% to build out those technologies. 00:43:19.160 --> 00:43:22.520 align:middle line:90% So timing is important. 00:43:22.520 --> 00:43:25.020 align:middle line:90% And then finally, people. 00:43:25.020 --> 00:43:27.120 align:middle line:84% People are the single biggest source 00:43:27.120 --> 00:43:32.320 align:middle line:84% of failure in most ventures in my experience. 00:43:32.320 --> 00:43:34.680 align:middle line:84% It's a quote from Alice in Wonderland. 00:43:34.680 --> 00:43:36.880 align:middle line:84% "One day Alice came to a fork in the road 00:43:36.880 --> 00:43:40.200 align:middle line:84% and saw a Cheshire cat in a tree. 00:43:40.200 --> 00:43:42.120 align:middle line:90% 'Which road do I take?' 00:43:42.120 --> 00:43:43.400 align:middle line:90% she asked. 00:43:43.400 --> 00:43:45.800 align:middle line:84% 'Where do you want to go?' said the cat. 00:43:45.800 --> 00:43:49.040 align:middle line:90% Alice answered, 'I don't know.' 00:43:49.040 --> 00:43:54.400 align:middle line:84% And the cat said, 'Well, then it doesn't really matter.'" Right? 00:43:54.400 --> 00:43:59.340 align:middle line:84% And what happens-- let's say we decide 00:43:59.340 --> 00:44:01.940 align:middle line:84% that we're going to go watch the New England Patriots play 00:44:01.940 --> 00:44:04.207 align:middle line:90% football next week. 00:44:04.207 --> 00:44:05.040 align:middle line:90% Well, wait a second. 00:44:05.040 --> 00:44:06.120 align:middle line:84% There are a couple problems with that. 00:44:06.120 --> 00:44:08.183 align:middle line:84% First of all, they've had a terrible season, 00:44:08.183 --> 00:44:09.600 align:middle line:84% and they're not playing next week. 00:44:09.600 --> 00:44:12.000 align:middle line:84% So what if we wanted to go see the Celtics, all right? 00:44:12.000 --> 00:44:13.380 align:middle line:90% It's a pretty good team. 00:44:13.380 --> 00:44:15.440 align:middle line:84% So we agree we're going to go see the Celtics. 00:44:15.440 --> 00:44:22.260 align:middle line:84% And we start off, and we hit a Road Closed sign. 00:44:22.260 --> 00:44:24.060 align:middle line:84% In Boston, there are two seasons, winter 00:44:24.060 --> 00:44:25.500 align:middle line:90% and construction. 00:44:25.500 --> 00:44:28.660 align:middle line:84% And recently, they seem to be the same season. 00:44:28.660 --> 00:44:30.993 align:middle line:84% But if we come to that Road Closure sign, 00:44:30.993 --> 00:44:32.160 align:middle line:90% we know where we want to go. 00:44:32.160 --> 00:44:33.577 align:middle line:84% We'll figure out how to get there. 00:44:33.577 --> 00:44:36.380 align:middle line:84% We might have to take a big, long, more expensive way 00:44:36.380 --> 00:44:41.260 align:middle line:84% to get there, but as a team, we'll figure it out. 00:44:41.260 --> 00:44:43.540 align:middle line:84% A number of years ago, I had three MIT teams 00:44:43.540 --> 00:44:47.000 align:middle line:84% come into my office when I was practicing law, which was great, 00:44:47.000 --> 00:44:49.140 align:middle line:90% and they had some great ideas. 00:44:49.140 --> 00:44:53.380 align:middle line:84% And the first one came in-- and there were three of them. 00:44:53.380 --> 00:44:57.010 align:middle line:84% And the first person, I said, tell me one of your goals. 00:44:57.010 --> 00:44:59.150 align:middle line:84% What are your goals for this venture? 00:44:59.150 --> 00:45:01.870 align:middle line:84% The first one said, I want this technology 00:45:01.870 --> 00:45:04.070 align:middle line:84% to be a standard in the industry. 00:45:04.070 --> 00:45:06.510 align:middle line:90% Oh, that's a pretty good goal. 00:45:06.510 --> 00:45:07.990 align:middle line:90% How about you? 00:45:07.990 --> 00:45:09.270 align:middle line:90% The next person. 00:45:09.270 --> 00:45:10.370 align:middle line:90% Oh, this is really big. 00:45:10.370 --> 00:45:12.370 align:middle line:84% I want to grow it and take it public. 00:45:12.370 --> 00:45:13.950 align:middle line:90% We can make a lot of money. 00:45:13.950 --> 00:45:16.230 align:middle line:90% Well, that's a good idea too. 00:45:16.230 --> 00:45:19.110 align:middle line:90% What about the third person? 00:45:19.110 --> 00:45:21.950 align:middle line:84% Well, I think it's important, but I really-- 00:45:21.950 --> 00:45:23.810 align:middle line:84% I think we should be a collegial group. 00:45:23.810 --> 00:45:25.590 align:middle line:84% And we can make money, but we don't 00:45:25.590 --> 00:45:27.530 align:middle line:90% have to grow like gangbusters. 00:45:27.530 --> 00:45:28.710 align:middle line:90% I want a more of a-- 00:45:28.710 --> 00:45:30.210 align:middle line:84% I don't want to call it lifestyle, 00:45:30.210 --> 00:45:32.070 align:middle line:90% but I don't want it to go crazy. 00:45:32.070 --> 00:45:34.450 align:middle line:84% [LAUGHS] And I sort of put my pen down. 00:45:34.450 --> 00:45:36.790 align:middle line:84% I was writing and I said, did you three just 00:45:36.790 --> 00:45:37.970 align:middle line:90% meet in the elevator? 00:45:37.970 --> 00:45:39.270 align:middle line:90% [LAUGHTER] 00:45:39.270 --> 00:45:40.950 align:middle line:90% I mean, think about it. 00:45:40.950 --> 00:45:44.550 align:middle line:84% The one who wants the technology to be standard 00:45:44.550 --> 00:45:46.050 align:middle line:90% might want it to be open source. 00:45:46.050 --> 00:45:47.190 align:middle line:90% Give it away. 00:45:47.190 --> 00:45:48.710 align:middle line:90% I want it everywhere. 00:45:48.710 --> 00:45:50.458 align:middle line:84% The person who wants to go public 00:45:50.458 --> 00:45:52.750 align:middle line:84% wouldn't want that to happen unless they can figure out 00:45:52.750 --> 00:45:54.290 align:middle line:90% an open source model, right? 00:45:54.290 --> 00:45:57.470 align:middle line:84% Because I want to grow something fast and valuable. 00:45:57.470 --> 00:46:00.913 align:middle line:84% And the third person, I don't know where they are. 00:46:00.913 --> 00:46:02.330 align:middle line:84% But when they hit their first bump 00:46:02.330 --> 00:46:05.810 align:middle line:84% in the road, what do you think's going to happen? 00:46:05.810 --> 00:46:07.860 align:middle line:84% And it doesn't matter if you don't know 00:46:07.860 --> 00:46:09.110 align:middle line:90% where you're going, all right? 00:46:09.110 --> 00:46:11.510 align:middle line:84% So maybe I've overblown it, but it was so stark. 00:46:11.510 --> 00:46:14.570 align:middle line:84% I really said, did you just meet in the elevator? 00:46:14.570 --> 00:46:15.470 align:middle line:90% OK. 00:46:15.470 --> 00:46:18.810 align:middle line:90% Other people-related issues. 00:46:18.810 --> 00:46:22.610 align:middle line:84% This doesn't happen too often, but when venture money-- 00:46:22.610 --> 00:46:24.810 align:middle line:84% there's a lot of money chasing deals out there, 00:46:24.810 --> 00:46:26.750 align:middle line:84% and there are hot periods of time. 00:46:26.750 --> 00:46:29.090 align:middle line:90% AI is part of that now. 00:46:29.090 --> 00:46:32.050 align:middle line:84% You may get funded before you really 00:46:32.050 --> 00:46:34.530 align:middle line:90% understand what you're doing. 00:46:34.530 --> 00:46:37.130 align:middle line:84% And an example, sort of an analogy example, 00:46:37.130 --> 00:46:40.490 align:middle line:84% is suppose your idea was you think 00:46:40.490 --> 00:46:42.970 align:middle line:90% people want to watch football. 00:46:42.970 --> 00:46:47.250 align:middle line:84% So you assemble a football team, and you buy a stadium, right? 00:46:47.250 --> 00:46:50.290 align:middle line:84% And then you go out to start to sell tickets. 00:46:50.290 --> 00:46:51.630 align:middle line:90% And what happens? 00:46:51.630 --> 00:46:54.170 align:middle line:84% People say, I want to watch basketball. 00:46:54.170 --> 00:46:55.130 align:middle line:90% It's cold out there. 00:46:55.130 --> 00:46:56.830 align:middle line:90% I don't want to go football. 00:46:56.830 --> 00:46:59.470 align:middle line:84% Now you've got a situation where you've invested 00:46:59.470 --> 00:47:01.010 align:middle line:90% all this time and money with-- 00:47:01.010 --> 00:47:03.750 align:middle line:84% football players, great athletes, but they 00:47:03.750 --> 00:47:05.470 align:middle line:84% don't really play basketball the way 00:47:05.470 --> 00:47:07.270 align:middle line:90% that a basketball player would. 00:47:07.270 --> 00:47:09.990 align:middle line:84% And now you've got an internal pivot, right? 00:47:09.990 --> 00:47:11.790 align:middle line:84% Instead of looking at the customer, 00:47:11.790 --> 00:47:13.448 align:middle line:84% you've got this internal conflict like, 00:47:13.448 --> 00:47:14.490 align:middle line:90% who's going to get fired? 00:47:14.490 --> 00:47:15.870 align:middle line:90% We've got to change the model. 00:47:15.870 --> 00:47:18.690 align:middle line:84% I mean, it just starts to disintegrate all over the place. 00:47:18.690 --> 00:47:21.710 align:middle line:90% 00:47:21.710 --> 00:47:26.190 align:middle line:84% And then not knowing what you don't know. 00:47:26.190 --> 00:47:30.910 align:middle line:84% So E-Ink came out of the Media Lab here at MIT. 00:47:30.910 --> 00:47:34.110 align:middle line:84% It was an ability to make a low-cost, 00:47:34.110 --> 00:47:36.230 align:middle line:84% at the time, black and white display 00:47:36.230 --> 00:47:41.230 align:middle line:84% that would display things electronically. 00:47:41.230 --> 00:47:45.310 align:middle line:84% Eventually, it ended up as the original Kindle reader. 00:47:45.310 --> 00:47:47.317 align:middle line:84% And they came in, and they really 00:47:47.317 --> 00:47:48.650 align:middle line:90% knew what they were going to do. 00:47:48.650 --> 00:47:49.907 align:middle line:90% They were all gung ho. 00:47:49.907 --> 00:47:51.990 align:middle line:84% We're going to do this, that, and the other thing. 00:47:51.990 --> 00:47:54.032 align:middle line:84% And we listened to them and asked them questions. 00:47:54.032 --> 00:47:56.970 align:middle line:84% And we're thinking, I don't know about these guys. 00:47:56.970 --> 00:47:59.750 align:middle line:84% How much do you think you're going to take to get there? 00:47:59.750 --> 00:48:00.710 align:middle line:90% Oh, $15 million. 00:48:00.710 --> 00:48:02.073 align:middle line:90% That should be more than enough. 00:48:02.073 --> 00:48:03.490 align:middle line:84% And I remember saying, I don't see 00:48:03.490 --> 00:48:06.130 align:middle line:84% how you're going to do it for less than $80 million, 00:48:06.130 --> 00:48:07.670 align:middle line:90% and I was off by $80 million. 00:48:07.670 --> 00:48:11.050 align:middle line:84% Eventually, they raised $160 million, 00:48:11.050 --> 00:48:12.710 align:middle line:90% and they eventually got it out. 00:48:12.710 --> 00:48:15.970 align:middle line:84% But they were so sure they knew everything that they were doing, 00:48:15.970 --> 00:48:18.250 align:middle line:84% they didn't know what they didn't know. 00:48:18.250 --> 00:48:20.410 align:middle line:84% And again, we didn't want to partner 00:48:20.410 --> 00:48:22.610 align:middle line:84% up with people that don't know that they 00:48:22.610 --> 00:48:24.510 align:middle line:84% don't know stuff and want to learn about it. 00:48:24.510 --> 00:48:27.090 align:middle line:90% 00:48:27.090 --> 00:48:29.750 align:middle line:90% Now, this is a curve graph. 00:48:29.750 --> 00:48:32.970 align:middle line:90% You'll see it later this week. 00:48:32.970 --> 00:48:36.670 align:middle line:84% In the $100k competition, we bring together people. 00:48:36.670 --> 00:48:40.250 align:middle line:84% And after a few years, we realized that some of the teams 00:48:40.250 --> 00:48:43.770 align:middle line:84% were having internal problems and blowing up. 00:48:43.770 --> 00:48:47.930 align:middle line:84% And typically, there would be a technical founder and then 00:48:47.930 --> 00:48:50.910 align:middle line:90% a business founder. 00:48:50.910 --> 00:48:55.550 align:middle line:84% And they would try to figure out what they're doing. 00:48:55.550 --> 00:48:59.230 align:middle line:84% And as I listened to all the cases of all the problems 00:48:59.230 --> 00:49:01.610 align:middle line:84% they were having, I came up with this graph. 00:49:01.610 --> 00:49:06.390 align:middle line:84% And the vertical axis is relative importance 00:49:06.390 --> 00:49:09.270 align:middle line:90% and horizontal axis is time. 00:49:09.270 --> 00:49:13.190 align:middle line:84% And if I have a technical founder, technical founder whose 00:49:13.190 --> 00:49:18.110 align:middle line:84% idea it is, his or her idea, working maybe in the lab, 00:49:18.110 --> 00:49:22.690 align:middle line:84% working 60, 70, 80 hours a week, just like crazy. 00:49:22.690 --> 00:49:25.390 align:middle line:84% The business founder at the beginning 00:49:25.390 --> 00:49:27.510 align:middle line:84% may be working on another regular job, 00:49:27.510 --> 00:49:29.730 align:middle line:84% working on this in the evenings and weekends, 00:49:29.730 --> 00:49:31.970 align:middle line:84% trying to figure out the market and all that stuff. 00:49:31.970 --> 00:49:34.230 align:middle line:84% But until we have something that works technically, 00:49:34.230 --> 00:49:36.190 align:middle line:90% we don't have a business. 00:49:36.190 --> 00:49:37.910 align:middle line:84% And now it comes to have a discussion 00:49:37.910 --> 00:49:41.350 align:middle line:84% about how we're going to split up the equity in the company. 00:49:41.350 --> 00:49:43.630 align:middle line:84% Where would you put the technical entrepreneur's view 00:49:43.630 --> 00:49:48.650 align:middle line:90% of the world at the beginning? 00:49:48.650 --> 00:49:51.063 align:middle line:90% Pretty high. 00:49:51.063 --> 00:49:52.730 align:middle line:84% What do you think the technical person's 00:49:52.730 --> 00:49:55.170 align:middle line:84% going to think about the business person? 00:49:55.170 --> 00:49:55.990 align:middle line:90% Pretty low. 00:49:55.990 --> 00:49:59.290 align:middle line:90% 00:49:59.290 --> 00:50:01.270 align:middle line:84% Now, how do you build a team around that? 00:50:01.270 --> 00:50:03.610 align:middle line:90% What happens over time? 00:50:03.610 --> 00:50:07.130 align:middle line:84% The relative importance of the technology goes down. 00:50:07.130 --> 00:50:10.290 align:middle line:84% The relative importance of the business side goes up. 00:50:10.290 --> 00:50:12.193 align:middle line:84% Whether they cross or not doesn't matter. 00:50:12.193 --> 00:50:13.610 align:middle line:84% But when I put this graph together 00:50:13.610 --> 00:50:15.152 align:middle line:84% and they realize, you know, it really 00:50:15.152 --> 00:50:19.810 align:middle line:84% takes a team to make this work, it 00:50:19.810 --> 00:50:22.210 align:middle line:84% began to open up a whole level of discussions about, 00:50:22.210 --> 00:50:23.670 align:middle line:90% how do we structure ourselves? 00:50:23.670 --> 00:50:25.690 align:middle line:90% How is it going to work? 00:50:25.690 --> 00:50:27.370 align:middle line:90% A classic people issue. 00:50:27.370 --> 00:50:29.250 align:middle line:84% Happens, of course, with technology companies 00:50:29.250 --> 00:50:31.410 align:middle line:90% more than others. 00:50:31.410 --> 00:50:32.730 align:middle line:90% OK. 00:50:32.730 --> 00:50:35.730 align:middle line:84% So there's what we're trying to get at. 00:50:35.730 --> 00:50:41.810 align:middle line:84% Now, I'm going to give you four actual companies I worked with, 00:50:41.810 --> 00:50:45.590 align:middle line:84% and I'm going to talk about how these came together or didn't 00:50:45.590 --> 00:50:47.510 align:middle line:90% and what we can learn from them. 00:50:47.510 --> 00:50:51.150 align:middle line:90% The first I'll call SpeechCo. 00:50:51.150 --> 00:50:53.550 align:middle line:84% This had all of the four components. 00:50:53.550 --> 00:50:55.350 align:middle line:90% It went public. 00:50:55.350 --> 00:50:57.690 align:middle line:84% And basically, if you have Siri on your phone, 00:50:57.690 --> 00:50:59.950 align:middle line:90% that's where Siri came from. 00:50:59.950 --> 00:51:04.830 align:middle line:84% DARPA, the Defense Advanced Research Project Agency, 00:51:04.830 --> 00:51:08.870 align:middle line:84% had funded four or five universities across the US 00:51:08.870 --> 00:51:13.470 align:middle line:84% to do speech recognition and natural language processing. 00:51:13.470 --> 00:51:18.830 align:middle line:84% So speech recognition was, what words were said? 00:51:18.830 --> 00:51:21.950 align:middle line:84% When I say something, what did I say? 00:51:21.950 --> 00:51:25.390 align:middle line:84% My accent is different than somebody from Scotland 00:51:25.390 --> 00:51:27.270 align:middle line:90% or somebody from the Deep South. 00:51:27.270 --> 00:51:29.170 align:middle line:90% So that's sort of a problem. 00:51:29.170 --> 00:51:31.310 align:middle line:90% What are those words? 00:51:31.310 --> 00:51:35.630 align:middle line:84% Then the question is, what do those words mean? 00:51:35.630 --> 00:51:38.310 align:middle line:84% Now this is before we've had the advances in AI 00:51:38.310 --> 00:51:42.630 align:middle line:84% that we've had today, but you can see the beginning of it. 00:51:42.630 --> 00:51:46.930 align:middle line:84% So the technical founder came out of Victor Xu's lab here 00:51:46.930 --> 00:51:50.250 align:middle line:84% at MIT, and came to me, and we started 00:51:50.250 --> 00:51:51.990 align:middle line:90% talking about this concept. 00:51:51.990 --> 00:51:56.090 align:middle line:84% And he said, we can do this now in telephony. 00:51:56.090 --> 00:51:58.330 align:middle line:90% We can do telephone systems. 00:51:58.330 --> 00:52:00.230 align:middle line:84% Sparc workstations have the power. 00:52:00.230 --> 00:52:01.810 align:middle line:90% We don't need mainframes. 00:52:01.810 --> 00:52:03.770 align:middle line:90% We can make this work. 00:52:03.770 --> 00:52:05.970 align:middle line:84% At the same time, there was a client of mine 00:52:05.970 --> 00:52:09.290 align:middle line:84% who had just sold his business to Adobe 00:52:09.290 --> 00:52:15.090 align:middle line:84% and was on a one-year earn-out, workout, noncompete-type thing. 00:52:15.090 --> 00:52:18.090 align:middle line:84% So I put the two of them together, and the three of us 00:52:18.090 --> 00:52:24.610 align:middle line:84% spent that year having endless meetings, Chinese food dinners, 00:52:24.610 --> 00:52:28.290 align:middle line:84% talking about, how could this all work? 00:52:28.290 --> 00:52:31.050 align:middle line:84% Because the business guy couldn't really 00:52:31.050 --> 00:52:34.070 align:middle line:84% work on it yet, because he was still working at Adobe. 00:52:34.070 --> 00:52:36.890 align:middle line:90% 00:52:36.890 --> 00:52:39.050 align:middle line:84% By the way, I could usually figure out 00:52:39.050 --> 00:52:41.990 align:middle line:84% when a former client, after they sold their business, 00:52:41.990 --> 00:52:42.928 align:middle line:90% would be back. 00:52:42.928 --> 00:52:44.470 align:middle line:84% I could almost put it on my calendar. 00:52:44.470 --> 00:52:46.650 align:middle line:84% A year and a day after the deal closed, 00:52:46.650 --> 00:52:49.390 align:middle line:84% they'd be back wanting to do something else. 00:52:49.390 --> 00:52:51.390 align:middle line:84% So we went out, spent all that time 00:52:51.390 --> 00:52:53.270 align:middle line:90% planning and thinking about it. 00:52:53.270 --> 00:52:56.750 align:middle line:84% They went out, and we raised money from a venture firm. 00:52:56.750 --> 00:52:59.070 align:middle line:84% There's a whole history of, if you haven't studied it 00:52:59.070 --> 00:53:01.630 align:middle line:84% in the world, of speech recognition, 00:53:01.630 --> 00:53:05.030 align:middle line:84% about some fraud that went on that these guys managed 00:53:05.030 --> 00:53:06.310 align:middle line:90% to avoid. 00:53:06.310 --> 00:53:09.850 align:middle line:84% They went public, and it worked out just fine. 00:53:09.850 --> 00:53:13.310 align:middle line:84% And the reason is the idea was great. 00:53:13.310 --> 00:53:18.550 align:middle line:84% The timing was perfect because the compute power was there. 00:53:18.550 --> 00:53:22.750 align:middle line:84% The execution, back then, because of the way AI-- 00:53:22.750 --> 00:53:25.370 align:middle line:84% we didn't have the power, if you were going to do this, 00:53:25.370 --> 00:53:29.270 align:middle line:84% you normally wanted to do it in a domain of knowledge. 00:53:29.270 --> 00:53:33.350 align:middle line:84% And so you would learn from how people spoke in that domain. 00:53:33.350 --> 00:53:34.750 align:middle line:84% So they managed to figure out how 00:53:34.750 --> 00:53:37.030 align:middle line:84% to do a deal with Eastern Airlines, which 00:53:37.030 --> 00:53:42.610 align:middle line:84% was one of the big airplane carriers back in the day. 00:53:42.610 --> 00:53:44.610 align:middle line:84% And Eastern thought this was great 00:53:44.610 --> 00:53:48.790 align:middle line:84% that they could do online or over phone reservations, 00:53:48.790 --> 00:53:52.450 align:middle line:84% but they didn't want to expose their customers to it. 00:53:52.450 --> 00:53:56.730 align:middle line:84% So they said, can you do this for our flight crews? 00:53:56.730 --> 00:53:59.350 align:middle line:84% So when you're a flight crew on a thing, 00:53:59.350 --> 00:54:01.690 align:middle line:84% you need to figure out how to shuttle back to your home, 00:54:01.690 --> 00:54:02.770 align:middle line:90% or whatever. 00:54:02.770 --> 00:54:04.850 align:middle line:84% And so they set it up, and the flight crews 00:54:04.850 --> 00:54:06.670 align:middle line:84% were the ones that tested the system. 00:54:06.670 --> 00:54:09.290 align:middle line:84% And they learned the domain around it 00:54:09.290 --> 00:54:10.830 align:middle line:90% and how to deal with it. 00:54:10.830 --> 00:54:13.690 align:middle line:84% I need to be in Cleveland on Tuesday. 00:54:13.690 --> 00:54:15.470 align:middle line:90% Obviously, they wanted to fly. 00:54:15.470 --> 00:54:18.850 align:middle line:84% They weren't going to be renting a car or something like that. 00:54:18.850 --> 00:54:22.010 align:middle line:84% So the execution was great, and the people, because of that year 00:54:22.010 --> 00:54:24.510 align:middle line:84% they spent getting to know each other, 00:54:24.510 --> 00:54:26.490 align:middle line:90% they worked very well together. 00:54:26.490 --> 00:54:29.730 align:middle line:90% So that was a success. 00:54:29.730 --> 00:54:32.490 align:middle line:84% The second one is also a success. 00:54:32.490 --> 00:54:34.090 align:middle line:84% I'll call it VideoCo, although I'm 00:54:34.090 --> 00:54:37.290 align:middle line:84% going to show you the name in a moment. 00:54:37.290 --> 00:54:42.940 align:middle line:84% This was somebody out of Sloan, technology out of the Media Lab. 00:54:42.940 --> 00:54:48.580 align:middle line:84% It was desktop video editing on the Macintosh computer. 00:54:48.580 --> 00:54:51.620 align:middle line:84% At the time, if you were going to do video editing, 00:54:51.620 --> 00:54:54.980 align:middle line:84% the equipment was like $1 million kind of equipment. 00:54:54.980 --> 00:54:57.340 align:middle line:84% Usually, you'd go to a video editing studio 00:54:57.340 --> 00:54:59.060 align:middle line:90% and you'd spend a day there. 00:54:59.060 --> 00:55:01.600 align:middle line:84% And they said, the technology is such now, 00:55:01.600 --> 00:55:04.140 align:middle line:84% even though the Mac wasn't the most powerful computer, 00:55:04.140 --> 00:55:07.800 align:middle line:84% that we can actually do video editing on a desktop machine. 00:55:07.800 --> 00:55:10.500 align:middle line:90% 00:55:10.500 --> 00:55:12.940 align:middle line:90% So the idea was good. 00:55:12.940 --> 00:55:15.220 align:middle line:90% The timing was good. 00:55:15.220 --> 00:55:19.820 align:middle line:84% The timing was good because the technology was there. 00:55:19.820 --> 00:55:23.890 align:middle line:84% The execution had me worried at the beginning. 00:55:23.890 --> 00:55:26.140 align:middle line:84% So the name of the company, when they incorporated it, 00:55:26.140 --> 00:55:30.460 align:middle line:84% was Macromedia Business Applications Corporation. 00:55:30.460 --> 00:55:32.660 align:middle line:84% And in short order, they got a letter 00:55:32.660 --> 00:55:35.640 align:middle line:84% from Macromedia, a bigger company, 00:55:35.640 --> 00:55:37.040 align:middle line:90% saying, hey, wait a second. 00:55:37.040 --> 00:55:38.620 align:middle line:90% That's our name. 00:55:38.620 --> 00:55:40.357 align:middle line:90% And trademark infringement. 00:55:40.357 --> 00:55:41.940 align:middle line:84% We're going to get you and everything. 00:55:41.940 --> 00:55:44.960 align:middle line:84% And it turned out our guys used the word-- the term 00:55:44.960 --> 00:55:47.080 align:middle line:90% before Macromedia did. 00:55:47.080 --> 00:55:50.340 align:middle line:84% So Macromedia, the big company, said, well, 00:55:50.340 --> 00:55:52.080 align:middle line:90% can we buy out the name? 00:55:52.080 --> 00:55:54.820 align:middle line:90% So they said, here's $25,000. 00:55:54.820 --> 00:55:57.920 align:middle line:84% All you have to do is change the name of your company. 00:55:57.920 --> 00:55:59.400 align:middle line:90% Hey, a good way-- 00:55:59.400 --> 00:56:02.720 align:middle line:84% nondilutive equity-- non-equity funding. 00:56:02.720 --> 00:56:04.295 align:middle line:90% So I got the check. 00:56:04.295 --> 00:56:06.420 align:middle line:84% All they have to do is file something at the state. 00:56:06.420 --> 00:56:09.800 align:middle line:84% Says change the name to anything. 00:56:09.800 --> 00:56:11.700 align:middle line:84% And two weeks go by and I'm calling. 00:56:11.700 --> 00:56:14.180 align:middle line:84% I said, what's wrong with you guys? 00:56:14.180 --> 00:56:16.980 align:middle line:90% [LAUGHS] Just give me any name. 00:56:16.980 --> 00:56:18.160 align:middle line:90% I don't care what. 00:56:18.160 --> 00:56:21.300 align:middle line:84% They said, well, we found some really cheap space in Cambridge. 00:56:21.300 --> 00:56:24.320 align:middle line:84% Why don't you come over and we'll show you what we're doing? 00:56:24.320 --> 00:56:27.520 align:middle line:84% So I go over there, and they have a whiteboard 00:56:27.520 --> 00:56:29.600 align:middle line:90% covered with names. 00:56:29.600 --> 00:56:30.700 align:middle line:90% And I'm going, oh, god. 00:56:30.700 --> 00:56:33.680 align:middle line:84% These guys, they can't pick a name. 00:56:33.680 --> 00:56:36.240 align:middle line:84% How are they going to execute on anything? 00:56:36.240 --> 00:56:42.460 align:middle line:84% So what they did, eventually, this is the name 00:56:42.460 --> 00:56:44.180 align:middle line:90% that they came up with. 00:56:44.180 --> 00:56:51.080 align:middle line:84% Digital Video Applications Corp, they shortened it to Diva. 00:56:51.080 --> 00:56:54.140 align:middle line:90% 00:56:54.140 --> 00:56:58.300 align:middle line:84% Two years later, the largest video editing company 00:56:58.300 --> 00:57:00.020 align:middle line:90% acquired them. 00:57:00.020 --> 00:57:02.660 align:middle line:90% The name of that company? 00:57:02.660 --> 00:57:05.180 align:middle line:90% Avid. 00:57:05.180 --> 00:57:07.100 align:middle line:90% Avid. 00:57:07.100 --> 00:57:08.720 align:middle line:90% Here's how avid is spelled. 00:57:08.720 --> 00:57:16.340 align:middle line:90% 00:57:16.340 --> 00:57:17.800 align:middle line:90% They weren't picking a name. 00:57:17.800 --> 00:57:20.740 align:middle line:90% They were picking a strategy. 00:57:20.740 --> 00:57:24.660 align:middle line:90% Diva is Avid spelled backwards. 00:57:24.660 --> 00:57:26.475 align:middle line:90% It focused everything they did. 00:57:26.475 --> 00:57:28.600 align:middle line:84% We went to the closing, and they gave me a t-shirt. 00:57:28.600 --> 00:57:29.660 align:middle line:84% They said, I know you didn't think 00:57:29.660 --> 00:57:31.000 align:middle line:90% we could execute very well. 00:57:31.000 --> 00:57:31.958 align:middle line:90% They gave me a t-shirt. 00:57:31.958 --> 00:57:33.980 align:middle line:84% In the front that said Diva from home, 00:57:33.980 --> 00:57:36.905 align:middle line:84% and the back said Avid to Hollywood. 00:57:36.905 --> 00:57:40.800 align:middle line:84% [LAUGHS] So an example of a company that I had 00:57:40.800 --> 00:57:42.960 align:middle line:90% doubts about on the execution. 00:57:42.960 --> 00:57:45.940 align:middle line:90% The people part worked out well. 00:57:45.940 --> 00:57:46.440 align:middle line:90% OK. 00:57:46.440 --> 00:57:48.760 align:middle line:84% Now some stories that didn't work out. 00:57:48.760 --> 00:57:51.480 align:middle line:90% I'll call this one HIV-Co. 00:57:51.480 --> 00:57:56.600 align:middle line:84% This was back when AIDS was just hitting a big epidemic. 00:57:56.600 --> 00:57:59.000 align:middle line:84% The two co-founders were the discoverers 00:57:59.000 --> 00:58:02.920 align:middle line:84% of the CD4, which is the main receptor as part 00:58:02.920 --> 00:58:04.920 align:middle line:90% of the immune system. 00:58:04.920 --> 00:58:08.500 align:middle line:84% They got funded by some very big Wall Street people names. 00:58:08.500 --> 00:58:12.520 align:middle line:90% You would know if I told you. 00:58:12.520 --> 00:58:14.440 align:middle line:84% They had a science advisory board 00:58:14.440 --> 00:58:18.960 align:middle line:84% that included Anthony Fauci that's when I first met him-- 00:58:18.960 --> 00:58:20.700 align:middle line:84% and two other-- a couple of other people, 00:58:20.700 --> 00:58:22.800 align:middle line:84% but two very notable people at the time. 00:58:22.800 --> 00:58:27.240 align:middle line:84% Luc Montagnier from Institut Pasteur and Robert Gallo 00:58:27.240 --> 00:58:29.400 align:middle line:84% from the National Institutes of Health. 00:58:29.400 --> 00:58:31.480 align:middle line:84% In public, these two had disputes 00:58:31.480 --> 00:58:38.540 align:middle line:84% going about who first discovered HIV, enough so that eventually, 00:58:38.540 --> 00:58:41.620 align:middle line:84% President Reagan and President Chirac of France 00:58:41.620 --> 00:58:43.740 align:middle line:90% had to resolve the issue. 00:58:43.740 --> 00:58:46.800 align:middle line:84% But on that science advisory board, they were very collegial, 00:58:46.800 --> 00:58:49.900 align:middle line:90% and they got things done. 00:58:49.900 --> 00:58:52.260 align:middle line:90% So what went wrong? 00:58:52.260 --> 00:58:53.740 align:middle line:90% Well, it was a people issue. 00:58:53.740 --> 00:58:55.980 align:middle line:90% The idea was great. 00:58:55.980 --> 00:58:59.160 align:middle line:84% The execution of what they actually decided to do was good. 00:58:59.160 --> 00:59:01.380 align:middle line:84% The question is, did they pick the right things? 00:59:01.380 --> 00:59:02.440 align:middle line:90% The timing was great. 00:59:02.440 --> 00:59:05.860 align:middle line:84% They were in the middle of an AIDS epidemic, 00:59:05.860 --> 00:59:08.100 align:middle line:90% and they had some solutions. 00:59:08.100 --> 00:59:09.460 align:middle line:90% It was a people issue. 00:59:09.460 --> 00:59:12.340 align:middle line:84% The co-founders had massive problems 00:59:12.340 --> 00:59:14.140 align:middle line:90% with each other, turned out. 00:59:14.140 --> 00:59:16.140 align:middle line:84% They had never really worked together. 00:59:16.140 --> 00:59:19.860 align:middle line:84% It culminated in an all-night in Manhattan 00:59:19.860 --> 00:59:22.380 align:middle line:84% where, at the curb of the building, 00:59:22.380 --> 00:59:25.980 align:middle line:84% there were four or five stretch limos with drivers waiting 00:59:25.980 --> 00:59:29.260 align:middle line:84% for the high, big people on Wall Street that 00:59:29.260 --> 00:59:30.980 align:middle line:90% invested in this company. 00:59:30.980 --> 00:59:33.820 align:middle line:84% And they spent the evening basically hashing it out, 00:59:33.820 --> 00:59:35.238 align:middle line:84% how the company was going to work. 00:59:35.238 --> 00:59:37.280 align:middle line:84% And at one point, one of the big Wall Street guys 00:59:37.280 --> 00:59:40.000 align:middle line:84% got up and said, if you guys don't figure this out, 00:59:40.000 --> 00:59:42.000 align:middle line:84% you're going to be radioactive, and you're never 00:59:42.000 --> 00:59:45.080 align:middle line:84% going to raise a dime from anyone, ever. 00:59:45.080 --> 00:59:47.400 align:middle line:84% I mean, it was that big of a moment. 00:59:47.400 --> 00:59:48.340 align:middle line:90% They got over it. 00:59:48.340 --> 00:59:50.360 align:middle line:84% The company eventually went public, 00:59:50.360 --> 00:59:52.380 align:middle line:84% but it had only moderate success. 00:59:52.380 --> 00:59:57.450 align:middle line:84% It was people issues on that one. 00:59:57.450 --> 00:59:59.200 align:middle line:84% The final one I'm going to talk about is-- 00:59:59.200 --> 01:00:01.400 align:middle line:90% I'll call NanoCo. 01:00:01.400 --> 01:00:05.040 align:middle line:84% This was one of the first nanotechnology companies 01:00:05.040 --> 01:00:07.840 align:middle line:90% based on quantum chemistry. 01:00:07.840 --> 01:00:10.000 align:middle line:90% Concepts came out of some-- 01:00:10.000 --> 01:00:12.440 align:middle line:90% here at MIT. 01:00:12.440 --> 01:00:14.700 align:middle line:84% We looked at a variety of different things to do, 01:00:14.700 --> 01:00:16.825 align:middle line:84% and the product we were trying to go to market with 01:00:16.825 --> 01:00:18.640 align:middle line:90% was called Nano Fuel. 01:00:18.640 --> 01:00:23.760 align:middle line:84% We were mixing diesel fuel and water together and running it 01:00:23.760 --> 01:00:26.480 align:middle line:90% in unmodified diesel engines. 01:00:26.480 --> 01:00:29.060 align:middle line:84% Now, you might say, you can't mix oil and water together. 01:00:29.060 --> 01:00:32.900 align:middle line:84% Well, if you figure something out, you can. 01:00:32.900 --> 01:00:35.380 align:middle line:84% You could pour it into an unmodified diesel engine, 01:00:35.380 --> 01:00:38.580 align:middle line:84% and you got an emission profile cleaner than natural gas. 01:00:38.580 --> 01:00:42.220 align:middle line:84% We were running it in buses at Logan Airport for testing 01:00:42.220 --> 01:00:45.900 align:middle line:84% and in new buses, and in Costa Rica. 01:00:45.900 --> 01:00:50.180 align:middle line:84% At the time, if you wanted to get clean transportation, 01:00:50.180 --> 01:00:53.740 align:middle line:84% people were talking about compressed natural gas. 01:00:53.740 --> 01:00:59.420 align:middle line:84% But the energy density for gas is much less than diesel, 01:00:59.420 --> 01:01:02.780 align:middle line:84% and so you need to have whole other new facilities to handle 01:01:02.780 --> 01:01:05.280 align:middle line:84% the natural gas you needed to change buses. 01:01:05.280 --> 01:01:06.640 align:middle line:90% The routes had to get changed. 01:01:06.640 --> 01:01:09.920 align:middle line:84% Our stuff, all you had to do was pour it into the tank. 01:01:09.920 --> 01:01:12.860 align:middle line:90% 01:01:12.860 --> 01:01:15.660 align:middle line:84% We had to do some execution issues, including some skunk 01:01:15.660 --> 01:01:18.500 align:middle line:84% works, because we had some disputes going on in the lab. 01:01:18.500 --> 01:01:21.020 align:middle line:84% The lab people had their head up-- 01:01:21.020 --> 01:01:22.000 align:middle line:90% I won't say where. 01:01:22.000 --> 01:01:25.755 align:middle line:90% [LAUGHS] The timing was-- 01:01:25.755 --> 01:01:27.880 align:middle line:84% and there were some other senior management issues, 01:01:27.880 --> 01:01:29.740 align:middle line:84% but the timing was a big thing here. 01:01:29.740 --> 01:01:31.780 align:middle line:84% When we were ready to go to market, 01:01:31.780 --> 01:01:35.180 align:middle line:84% the price of diesel fuel was at a 50-year low. 01:01:35.180 --> 01:01:39.200 align:middle line:84% It was $0.50 a gallon at the terminal. 01:01:39.200 --> 01:01:42.240 align:middle line:84% It wasn't that way when we started out. 01:01:42.240 --> 01:01:44.960 align:middle line:84% I did a calculation, and you couldn't even buy a gallon 01:01:44.960 --> 01:01:47.840 align:middle line:90% of distilled water for $0.50. 01:01:47.840 --> 01:01:49.460 align:middle line:84% I did a calculation that said, well, 01:01:49.460 --> 01:01:51.760 align:middle line:84% if diesel fuel were $2 a gallon, this 01:01:51.760 --> 01:01:55.440 align:middle line:84% would be an economically neutral-type thing. 01:01:55.440 --> 01:01:57.600 align:middle line:84% It just wasn't going to work at the time. 01:01:57.600 --> 01:01:59.580 align:middle line:84% The company went off and did some other things, 01:01:59.580 --> 01:02:01.440 align:middle line:90% but eventually it failed. 01:02:01.440 --> 01:02:04.640 align:middle line:84% And every time I get behind a big diesel truck 01:02:04.640 --> 01:02:07.500 align:middle line:90% or bus spewing fumes, I get-- 01:02:07.500 --> 01:02:09.820 align:middle line:84% it really annoys me that we had the solution, 01:02:09.820 --> 01:02:13.920 align:middle line:84% but we couldn't figure out how to bring that venture to market. 01:02:13.920 --> 01:02:16.480 align:middle line:84% So hopefully, those are some ideas. 01:02:16.480 --> 01:02:20.880 align:middle line:84% This allows me to do one of the cheesiest animations you're 01:02:20.880 --> 01:02:21.660 align:middle line:90% going to see. 01:02:21.660 --> 01:02:25.120 align:middle line:90% 01:02:25.120 --> 01:02:25.740 align:middle line:90% There you go. 01:02:25.740 --> 01:02:28.520 align:middle line:90% Success! 01:02:28.520 --> 01:02:29.840 align:middle line:90% OK. 01:02:29.840 --> 01:02:30.360 align:middle line:90% All right. 01:02:30.360 --> 01:02:33.340 align:middle line:84% So if you get all these things right-- you get the idea right, 01:02:33.340 --> 01:02:36.160 align:middle line:84% you get the execution, you get the timing and the people, 01:02:36.160 --> 01:02:40.060 align:middle line:84% you're going to have to convey that to people in some fashion. 01:02:40.060 --> 01:02:42.300 align:middle line:84% And so I want to spend just a couple of minutes 01:02:42.300 --> 01:02:45.780 align:middle line:90% talking about conveying ideas. 01:02:45.780 --> 01:02:48.420 align:middle line:84% One of the top-level things you're going to want to do 01:02:48.420 --> 01:02:51.580 align:middle line:84% is come up with a mission statement or a vision, sometimes 01:02:51.580 --> 01:02:53.860 align:middle line:90% called the value proposition. 01:02:53.860 --> 01:02:59.260 align:middle line:84% Steve Blank out of Stanford came up with this version of it. 01:02:59.260 --> 01:03:02.700 align:middle line:84% An example would be one sentence that says, 01:03:02.700 --> 01:03:09.900 align:middle line:84% we help X do Y by doing Z, where X is your target audience, 01:03:09.900 --> 01:03:14.060 align:middle line:84% Y is the goal or problem that they need solved, 01:03:14.060 --> 01:03:15.780 align:middle line:90% and Z is how you do it. 01:03:15.780 --> 01:03:21.500 align:middle line:84% So an example here would be we help people without 3D printers 01:03:21.500 --> 01:03:25.540 align:middle line:84% bring their ideas to life by providing 3D printing services 01:03:25.540 --> 01:03:29.100 align:middle line:84% and a marketplace for 3D-printed products. 01:03:29.100 --> 01:03:30.600 align:middle line:84% I think you can pretty much see what 01:03:30.600 --> 01:03:34.480 align:middle line:84% they're about as a business with that statement. 01:03:34.480 --> 01:03:35.400 align:middle line:90% OK. 01:03:35.400 --> 01:03:38.120 align:middle line:84% So hopefully, by the end of this course if you're actually 01:03:38.120 --> 01:03:40.093 align:middle line:84% thinking about a venture, you might 01:03:40.093 --> 01:03:42.260 align:middle line:84% be able to do that with something you're working on, 01:03:42.260 --> 01:03:46.520 align:middle line:84% or you'll remember this when you're looking at other things. 01:03:46.520 --> 01:03:49.600 align:middle line:84% Now, any vision needs to be supported. 01:03:49.600 --> 01:03:52.360 align:middle line:90% This is my famous pyramid. 01:03:52.360 --> 01:03:53.500 align:middle line:90% I'm looking at Bob. 01:03:53.500 --> 01:03:57.880 align:middle line:84% [LAUGHS] At the top is the mission statement. 01:03:57.880 --> 01:04:01.040 align:middle line:84% Below that is the elevator pitch. 01:04:01.040 --> 01:04:03.060 align:middle line:84% So each of these sort of leads to the next. 01:04:03.060 --> 01:04:06.280 align:middle line:84% So an elevator pitch is something-- 01:04:06.280 --> 01:04:07.840 align:middle line:84% the term came about back in the days 01:04:07.840 --> 01:04:09.340 align:middle line:84% when the venture capitalists lived-- 01:04:09.340 --> 01:04:11.580 align:middle line:84% and their offices were in high-rise buildings. 01:04:11.580 --> 01:04:14.960 align:middle line:84% And you'd get in the elevator, and somebody would turn to you 01:04:14.960 --> 01:04:18.330 align:middle line:84% and say, well, tell me what your guys are doing. 01:04:18.330 --> 01:04:20.080 align:middle line:84% And you had the time it took that elevator 01:04:20.080 --> 01:04:23.900 align:middle line:90% to go up to explain what it is. 01:04:23.900 --> 01:04:26.600 align:middle line:84% And the hope after that is they would say, well, come in 01:04:26.600 --> 01:04:29.290 align:middle line:90% and tell me more. 01:04:29.290 --> 01:04:31.387 align:middle line:84% Maybe come in or send me something. 01:04:31.387 --> 01:04:32.970 align:middle line:84% Do you have something you can send me, 01:04:32.970 --> 01:04:36.290 align:middle line:84% an executive summary, something written 01:04:36.290 --> 01:04:37.730 align:middle line:90% that could tell me about it? 01:04:37.730 --> 01:04:39.450 align:middle line:84% And then maybe if I like that, I'll 01:04:39.450 --> 01:04:45.410 align:middle line:84% invite you in to do a pitch to really get into it more. 01:04:45.410 --> 01:04:50.130 align:middle line:84% So the mission statement is-- be a sentence or a paragraph. 01:04:50.130 --> 01:04:52.930 align:middle line:90% The elevator pitch, 30 seconds. 01:04:52.930 --> 01:04:57.590 align:middle line:84% When the VCs moved to low-rise buildings, it became harder. 01:04:57.590 --> 01:04:58.930 align:middle line:90% You had to do it quicker. 01:04:58.930 --> 01:05:02.930 align:middle line:84% The elevators were slower, but you still had time. 01:05:02.930 --> 01:05:03.890 align:middle line:90% Executive summary. 01:05:03.890 --> 01:05:07.930 align:middle line:84% One, two, three, no more than four pages. 01:05:07.930 --> 01:05:10.290 align:middle line:84% And the pitch deck-- this is Guy Kawasaki. 01:05:10.290 --> 01:05:12.610 align:middle line:90% 10, 20, 30. 01:05:12.610 --> 01:05:14.330 align:middle line:90% 10 slides, no more. 01:05:14.330 --> 01:05:20.090 align:middle line:84% Not more than 20 minutes, and 30-point font on the slides. 01:05:20.090 --> 01:05:24.770 align:middle line:84% OK, so all of that is sort of the sizzle. 01:05:24.770 --> 01:05:27.630 align:middle line:84% So underneath that, you need to have-- 01:05:27.630 --> 01:05:29.510 align:middle line:84% understand all of these other things 01:05:29.510 --> 01:05:34.110 align:middle line:84% to support that distillation of what you're doing to the top. 01:05:34.110 --> 01:05:36.527 align:middle line:84% And the stuff we're going to go through each night, 01:05:36.527 --> 01:05:39.110 align:middle line:84% we're going to talk about all these different things down here 01:05:39.110 --> 01:05:45.470 align:middle line:84% to help you support the plan you come up with, the venture idea. 01:05:45.470 --> 01:05:49.350 align:middle line:84% Now if you get the sizzle right but you don't get the support 01:05:49.350 --> 01:05:54.390 align:middle line:84% right, you may end up like Thernos, Elizabeth 01:05:54.390 --> 01:06:00.470 align:middle line:84% Holmes, sentenced to prison, guilty on four of 11 charges. 01:06:00.470 --> 01:06:04.830 align:middle line:84% She promised all this stuff, and underneath it, 01:06:04.830 --> 01:06:06.830 align:middle line:90% there was nothing really there. 01:06:06.830 --> 01:06:08.770 align:middle line:84% This was fake it till you make it, 01:06:08.770 --> 01:06:11.250 align:middle line:84% which can work in some things, but this is medical devices. 01:06:11.250 --> 01:06:13.570 align:middle line:90% This is blood testing. 01:06:13.570 --> 01:06:17.550 align:middle line:84% And if you didn't diagnose somebody, people could die. 01:06:17.550 --> 01:06:19.710 align:middle line:90% You don't want to end up here. 01:06:19.710 --> 01:06:22.350 align:middle line:84% So most of the people here are going to have the substance 01:06:22.350 --> 01:06:24.250 align:middle line:84% and have a hard time with the sizzle. 01:06:24.250 --> 01:06:28.090 align:middle line:84% But I've got to caution you, sizzle without steak 01:06:28.090 --> 01:06:30.370 align:middle line:90% is an empty meal. 01:06:30.370 --> 01:06:37.050 align:middle line:84% So back to our H equals R divided by E. Well, 01:06:37.050 --> 01:06:40.650 align:middle line:84% I assumed that reality was a fixed constant, 01:06:40.650 --> 01:06:43.930 align:middle line:84% but people like Steve Jobs and maybe Elizabeth Holmes 01:06:43.930 --> 01:06:46.530 align:middle line:84% thought you can fake it till you make it, 01:06:46.530 --> 01:06:50.650 align:middle line:84% because we can do a reality distortion field. 01:06:50.650 --> 01:06:52.810 align:middle line:90% I wouldn't recommend it. 01:06:52.810 --> 01:06:55.890 align:middle line:90% Does this make sense? 01:06:55.890 --> 01:06:56.390 align:middle line:90% All right. 01:06:56.390 --> 01:06:59.410 align:middle line:90% So some final thoughts. 01:06:59.410 --> 01:07:03.190 align:middle line:84% Vinod Khosla, a famous venture capitalist, 01:07:03.190 --> 01:07:05.770 align:middle line:84% invested in a company of a friend of mine. 01:07:05.770 --> 01:07:09.730 align:middle line:84% And my friend asked him, what advice do you have for us? 01:07:09.730 --> 01:07:13.090 align:middle line:84% And Vinod said, "You'll face a dozen real challenges 01:07:13.090 --> 01:07:15.930 align:middle line:84% in developing the technology and venture, which 01:07:15.930 --> 01:07:19.220 align:middle line:90% is common to most ventures. 01:07:19.220 --> 01:07:20.970 align:middle line:84% Five of these you'll be resourceful enough 01:07:20.970 --> 01:07:25.070 align:middle line:84% to figure out from friends, colleagues, et cetera. 01:07:25.070 --> 01:07:27.950 align:middle line:84% And five of them you and your team are smart enough." 01:07:27.950 --> 01:07:30.350 align:middle line:90% You'll figure those out. 01:07:30.350 --> 01:07:33.270 align:middle line:84% My friend said, well, what about the other two? 01:07:33.270 --> 01:07:40.830 align:middle line:84% And Vinod said, for those two, you'd "better get darn lucky." 01:07:40.830 --> 01:07:48.110 align:middle line:84% Well, "luck favors the well prepared," 01:07:48.110 --> 01:07:50.230 align:middle line:90% and we want you to be prepared. 01:07:50.230 --> 01:07:52.370 align:middle line:84% That's the goal in this course, again, 01:07:52.370 --> 01:07:55.350 align:middle line:84% to help you be in the part that succeeds 01:07:55.350 --> 01:07:57.430 align:middle line:90% if you decide to do a venture. 01:07:57.430 --> 01:07:59.850 align:middle line:84% If you look at something and decide it's not for you, 01:07:59.850 --> 01:08:04.070 align:middle line:84% that's success also, because you go find another one. 01:08:04.070 --> 01:08:08.910 align:middle line:84% So with that, that's my overview of new ventures. 01:08:08.910 --> 01:08:11.070 align:middle line:90% We're going to do a break here. 01:08:11.070 --> 01:08:14.710 align:middle line:84% A little early for team building. 01:08:14.710 --> 01:08:19.470 align:middle line:84% Around the room, we've put on the walls 01:08:19.470 --> 01:08:23.410 align:middle line:84% different interest groups that you identified when you 01:08:23.410 --> 01:08:26.130 align:middle line:90% were signing up for the course. 01:08:26.130 --> 01:08:28.630 align:middle line:84% I'm going to suggest you go-- if you're interested in that, 01:08:28.630 --> 01:08:30.270 align:middle line:90% just go stand there. 01:08:30.270 --> 01:08:36.050 align:middle line:84% Meet somebody and see if you have some interest. 01:08:36.050 --> 01:08:38.290 align:middle line:84% And we'll come back in 10 or 15 minutes, 01:08:38.290 --> 01:08:41.210 align:middle line:84% and we'll talk about course logistics 01:08:41.210 --> 01:08:44.170 align:middle line:90% and finding your customers. 01:08:44.170 --> 01:08:50.330 align:middle line:84% We also have a WhatsApp group that our TAs put together 01:08:50.330 --> 01:08:53.050 align:middle line:84% where you can actually sign up to a WhatsApp group 01:08:53.050 --> 01:08:55.330 align:middle line:90% on one of these interest things. 01:08:55.330 --> 01:08:57.670 align:middle line:90% So we're at about 7:10. 01:08:57.670 --> 01:09:03.267 align:middle line:84% Why don't we come back at about 7:25, and we'll do the second-- 01:09:03.267 --> 01:09:04.850 align:middle line:84% we'll talk about the course logistics. 01:09:04.850 --> 01:09:07.170 align:middle line:84% And then we'll do a-- we'll have Bob come in 01:09:07.170 --> 01:09:09.820 align:middle line:90% and talk about customers. 01:09:09.820 --> 01:09:21.000 align:middle line:90%