Crystallizing Your Company

C t lli i Y
Crystallizing Your Company
C
Workshop How to Create a Photonics SME
June 23rd, 2013
June 23
2013
Erik Pennings
4 focus points for crystallizing your company
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Why do it? Personal considerations
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How to develop a great product
How to develop a great product
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How to sell and market your product

How to financially manage your startup
y
g y
p
Crystallizing Your Own Company
23‐jun‐13
p2
Why start a company?
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Startups are exciting and inspire
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S
Startups are essential for economic growth
i lf
i
h
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Why are Google/E‐Bay/Amazon/Intel/MS/Facebook all new?
What’s tr e for econom ma also appl at a personal le el
What’s true for economy, may also apply at a personal level
Key questions
Key questions


What’s in it?
What are the risks?
What are the risks?
Crystallizing Your Own Company
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p3
What about risks and certainty?
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Pensions are an important consideration
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
When joining a startup, you may loose what you
When
joining a startup, you may loose what you’ve
ve built up
built up
But how certain is a pension at GM or Alcatel‐Lucent?
You may be lucky, but it is better to control your own pension
US 401k plans are great and have been crucial for innovation
Job “security”
Job security is considered important as well
is considered important as well



But big companies can come and go (e.g. Kodak)
Japanese style job guarantee can turn a job into “a prison”
In the US, you often can get fired at notice (i.e. right away)
– But this may not correlate with the overall level of happiness

In the end, two things count: your skill set and the economy
Crystallizing Your Own Company
23‐jun‐13
p4
What are the benefits of starting?
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You build a broader experience and wider skill set
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The financial reward can be better, though more risky
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
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There is the starting, financing, and managing a company
I t t
In startups, people typically have to “do everything”
l t i ll h
t “d
thi ”
In big companies, there is competition for key responsibilities
Startups are typically at the forefront of innovation
p
yp
y
For example, startups often have option plans
For
example, startups often have option plans
And Bill Gates and Warren Buffet did not take a regular job
By the way, money should never be the prime motivator
You can chart your own course


Live in the place where you prefer to live
Work on the products and technology that are at your heart
Crystallizing Your Own Company
23‐jun‐13
p5
Start young or old?
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Start earlier
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Pensions are less of a concern, you may not yet have a family
There is less risk avoidance / more adventure seeking
Building a company takes time and you may start several…
Start later

Some experience really helps:
– Product development, sales and marketing, HR, finance, production


Most of the needed skills are not taught at school / university
Best may be right in the middle
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
Have a good bit of experience, but still be young enough
Remember that people always adept and manage
Crystallizing Your Own Company
23‐jun‐13
p6
Make certain your family is on board

Starting a company is not a small undertaking
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There will be financial implications
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
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You may have to invest your own money, there are risks
y
y
y,
There are health insurance / benefits to consider
It helps if your partner has a job
It helps if your partner has a job
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
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You will be working long hours
Two income streams help to diversify some of the risk
Better if not both work in a startup or in the same company
p
p y
It helps if your partner can think along

In the beginning you will not have any colleagues
In the beginning you will not have any colleagues
Crystallizing Your Own Company
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p7
In the end, just do it

Definitely do your homework
Definitely do your homework
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When starting yourself: make a business plan
When joining a startup: do your due diligence (like a VC)
When joining a startup: do your due diligence (like a VC)
And plan for your own pension
But it typically proves worth it
But it typically proves worth it
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You often learn more than what’s possible otherwise
You can chart your own course
You can chart your own course
While more risky, it often financially rewards
You help innovation and the economy at large
And most “certainties” prove futile anyway
Crystallizing Your Own Company
23‐jun‐13
p8
Product strategy: the issue
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You have great idea or technology
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But by asking customers, you may not get the right info
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And based on that you create a product or service
Henry Ford is quoted as: “If I ask my customer what they want, they say a cart with a faster horse”
And by looking at competition in detail, it puts you on A
d b l ki
t
titi i d t il it t
the road to copy and make a “me‐too product”
And if there is a new trend everyone will dive on the
And if there is a new trend, everyone will dive on the same topic (e.g. Si Photonics, SDN, 100G, etc)
So how can you arrive at a differentiated strategy?
So how can you arrive at a differentiated strategy?
Crystallizing Your Own Company
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p9
Differentiation
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
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With differentiation, you have to think different
The product or service should be different from what’s been done so far
But you still need to address a current market need
Crystallizing Your Own Company
23‐jun‐13
p10
Be ahead of the curve

When developing a product, you need to be ahead of the competition when introducing your product
competition when introducing your product


And developing a product may take 1 – 2 years
Determine first where the market is heading and then g
develop a product that is differentiated when introducing it
Crystallizing Your Own Company
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p11
Example in CPE for FTTH

This the competition / current market demand for CPEs /
(Customer Premise Equipment or ONT or NID)
Home indoor CPE
Business CPE
Home outdoor CPE

Challenge was to come up with an offering to match current Challenge
was to come up with an offering to match current
demand, while still being differentiated / ahead
Crystallizing Your Own Company
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p12
Example in 100G Trans‐Impedance Amp’s
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Plan was to develop a TIA for 100G coherent (DP‐QPSK)
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Figured out that things would quickly move to 400G
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400G most likely would use QAM and/or super channels
400G can be done using the same receiver/TIA as 100G


But competition was already established
But competition was already established
BUT, you need to have very good linearity
So the plan was to make a TIA differentiated on linearity
Crystallizing Your Own Company
23‐jun‐13
p13
Engaging customers on new products is tricky
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Customer discussion is key when developing products
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
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But customers do not like questionnaires
Best way to engage is in a “roadmap” discussion
And is asked incorrectly, you get the wrong answers

Key questions have to be presented as trade‐offs
Crystallizing Your Own Company
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p14
Sales and marketing: getting customers
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Product idea only useful if customers flock to your door
But incumbents have a brand and existing customers
b
h
b d d
So how do you build this up as a startup
Of course, you can do advertising and cold calling, but…
Crystallizing Your Own Company
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p15
Chasing customers is not particularly effective
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Before the internet, mass marketing was common
e o e t e te et, ass a et g as co
o
But with the internet, customers want to find you So your marketing efforts need to be more sophisticated
So your marketing efforts need to be more sophisticated
Crystallizing Your Own Company
23‐jun‐13
p16
Sales (i.e. efforts to actively engage on leads)
“Warm”
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Repeat buys
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Referrals from customers
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Follow‐up on inbound leads
Follow‐up on inbound leads
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Introductions from friends
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Partnering
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Precision cold calling
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Random cold calling
Random cold calling
Crystallizing Your Own Company
Best, but only possible f
for incumbents
b
Domain for startups
(or prospecting
(or prospecting incumbents)
Trend in time
“Cold”
Cold
Avoid
23‐jun‐13
p17
Marketing (efforts to create inbound leads)
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(Invited) presentations
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(Invited) workshops
(Invited) workshops
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Papers and press releases
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Newsletters and mailings
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Booth at show
Booth at show
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Organic SEO
“Warm”

Paid SEO (Search Eng. Opt.)

Advertising
Crystallizing Your Own Company
Best, but only possible for incumbents
for incumbents
Domain for startups
(or prospecting incumbents)
Trend in time
Trend in time
“Cold”
Cold
Avoid
23‐jun‐13
p18
Guerrilla marketing for startups
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“Warm” marketing/sales to be preferred over “cold”
g/
p

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Creating inbound leads better than chasing prospects
g
gp p
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Focus on getting the word out, so that people can find you
Encourage referrals
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Not only nicer on both ends, but just more effective
E.g. give a discount if customers mention you in a paper
Nobody is fond of (paid) advertising

Writing a paper for a magazine costs less and is more effective
Crystallizing Your Own Company
23‐jun‐13
p19
Financially managing your startup
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No matter how good your idea, if you continue spending more than g
y
, y
p
g
you earn, your company can not survive
As long as you earn more than then costs, you continue to be in b siness
business
When generating substantial cash, you have the resources to invest in new products, hiring people, new sales channels, acquisitions, etc
In order to be attractive to investors, a company needs to create $$
Crystallizing Your Own Company
23‐jun‐13
p20
Revenues: focus on customers
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Tendency can be to first focus on developing a product or first setting up shop, but focus should be on customers first

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Serving customers is what generates revenues
Serving
customers is what generates revenues
Customers drive product development
Let revenues drive expenses
p

E.g. spend on a lawyer for a contract after you get your 1st customer
Crystallizing Your Own Company
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p21
Costs: be frugal
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It is hard enough to earn revenues, so be careful with any $ spent
I ddi i
In addition, spending money takes valuable time/mindshare
di
k
l bl i / i d h
Think big, but find good scalable solutions that are cost effective
However be good to your suppliers and build strong relationships
However, be good to your suppliers and build strong relationships
Crystallizing Your Own Company
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p22
Minimize “the hockey stick”
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The hockey stick automatically assumes we invest first
But there are ways to minimize/eliminate the initial investment
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E.g. you can find a lead customer who wants to cofund the development
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Or divide a larger project into smaller ones that can be cascaded
Focus needs to be on generating revenues a.s.a.p. and minimizing Focus
needs to be on generating revenues a.s.a.p. and minimizing
costs leading up to that point
Crystallizing Your Own Company
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p23
Reduce / manage risk
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A big company can afford a mistake (though never nice)
g
p y
(
g
)


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But for a startup, a mistake can be fatal
If you develop a product and you get it wrong, you may not have a 2nd
chance
So be keen to reduce risks where possible

Have samples tested to ensure customer buy‐in or do a pilot run first

Diversity income streams and do due diligence on customers and vendors
Crystallizing Your Own Company
23‐jun‐13
p24
Funding your company
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There are a number of ways to fund your company

Self‐funded, friends, subsidies, banks, angels, VC
,
,
,
, g ,

In principle all forms can work / be successful

Be aware that all funding other than self‐funded has strings attached
Building a truly large company will often take deep pockets
ld
l l
ll f
k d
k


Be very selective and find really good VCs
Taking an approach of being self
Taking
an approach of being self‐funded
funded will put you in the best will put you in the best
position to negotiate for funding
Crystallizing Your Own Company
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p25
4 main conclusions
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Just do it!

Be differentiated/ahead of the curve
Be differentiated/ahead of the curve

Focus on guerilla marketing

Focus on customers, conserve cash, and grow
,
,
g
Crystallizing Your Own Company
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p26
Thanks!
Erik Pennings
Erik
Pennings
C: +1‐848‐228‐0807, P: +1‐609‐751‐5810
erik@7pennies.com, www.7pennies.com