Tag Archives: Entrepreneur

Biotech data – part 3/3: A short synthesis

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After Genentech, Chiron and Genzyme, let just me do a simple analysis of biotech start-ups. The table which follows summarizes it all and I added Amegn but it is obviously a little tough to read. You can enlarge it however. So you can see data about the companies themselves, foundation year, IPO year, revenues and profit/loss at IPO, current status and then data on founders, their age at foundation, what they were doing before the creation and what they did after the start-up adventure. Then I provide a link on them.

So what is interesting about the companies themselves?

– On average, it takes them 3 years to go public. So the myth that biotech start-ups develop slowly is linked to the revenue/profit status, not the exit status.
– Indeed, when they go public, they have very small revenues and lose money. Compare to Apple for example, on the first picture.
– They are very similar to Internet companies of the late 90s: they go public very soon without revenues and still losing money.
– Finally, they are acquired by European players. This is in total opposition to IT companies where the only buyers are American (check for example slide 36 of the pdf I published in the past).

Now the founders.
– First, they are not young people. Compare again to the same document, slide 27 now. American founders in the slide are on average of 27 year-old, and Europeans, 33 year-old.
– Many had an academic career they did not have to leave. They may have taken sabbaticals but many went back to their academic life. It is obviously related to the previous point.

These 3 posts have shown my small knowledge of biotech but also the fact that they are interesting not to say major differences between Biotech and Information Technology.

Advice to entrepreneurs

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I found instructive to compare two short videos from the STVP. The first one is dated 2002 and shows Larry Page, the co-founder of Google. The seconde one, with Aaron Levie, has just been published on january 19, 2011.

And here is a comparaison

Larry Page vs. Aaron Levie
  • Work with the right people, great people you are compatible with
    		•
  • Do not compromise. Be passionate
    		•
  • Have a healthy disregard for the impossible
    		•
  • Do something which was impossible 3 years ago
    		•
  • Do not follow the hype. Good ideas always get funding.
  • If you feel comfortable, you are probably not doing the right thing.

    • Clearly passion, ambition but also self-confidence are ingredients of entrepreneurship.

    Another very good post on the topic is Should You Really Be A Startup Entrepreneur? by Mark Suster, where the reality of entrepreneurship is superbly described.

    A Swiss (European) way for entrepreneurship?

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    With my seventh contribution to the Créateurs newsletter, I stay in Switzerland again with two succesful SMEs. Enjoy!


    There is a recurrent debate in the world of high-tech start-ups: and if the American model of fast growth supported by aggressive venture capital was not adapted for European or Swiss entrepreneurs? Two examples may contribute to the discussion: Sensirion and Mimotec.

    In my contribution to Créateurs last time, I had focused on Swissquote, which has become a magnificent success story, without that venture capital, which is so much criticized these days. Mimotec is an EPFL spin-off with 24 employees and about CHF10M in revenues. The company provides micro technologies for the watch industry. Mimotec was founded in 1998 by Hubert Lorenz who told his start-up’s story during a recent venture ideas conference at EPFL. It is a clear example of organic growth, a steady growth even if not exponential.

    Sensirion is probably more impressive. Founded also in 2008, it is an ETHZ spin-off and it sells pressure sensors, another field of expertise in Switzerland. In an article published for the MEMS 2008 conference, Felix Mayer, Sensirion’s co-founder and CEO, described the growth model of his company. Here is an extract: “The Europeans – especially the Swiss – do not go for the big thing! They rather start small and put one foot in front of the other. A characteristic of the European and Swiss mentality is not to promise high returns for a business idea based on an immature new technology. The European way is rather to start with the own money, to try to find customers, and to grow with the earnings. The Americans, as far as I can tell, follow the motto: “Shoot for the moon. Even if you miss, you will land among the stars”. This means: to go for the new big thing, write down a promising business plan, and raise money to realize it. Hunting for potentially high gains means, on the other hand, to take a higher risk. The United States have more of a high risk culture. However, if you fail, you also get a second chance. Europe is different in this respect”.

    Mayer adds that because the financial means are lacking, the European entrepreneur will be more challenged to target the very big markets. Therefore he believes in an intermediate path which will not generate Google-like companies, but leaders in their niche. Thanks to the patient support from a business angel and then from its customers, Sensirion can be proud in 2010 of its 180 employees (the revenue numbers are not public as the start-ups is still privately held). I should however add that it took Sensirion six years before ti could fund its growth through its profits; its business angel was apparently critical to its success.

    Is there a model that Europe may follow without just copying the Silicon Valley way? Yes, if we notice that very few companies could reach the size of Logitech or Actelion for example. Whatever the success of an Hubert Lorenz or a Felix Mayer, I cannot help expressing again the same thing I did in my book Start-Up. Why should not Europe ambition the same large success the USA experience in addition to our mid-size stories. Don’t you think the Americans do not have companies similar to Mimotec and Sensirion, in addition to Google or Apple? Criticizing venture capital might be an easy way and I prefer quoting an American entrepreneur on investors: “You can’t live with them, you can’t live without them” And let us not forget that Google has today about 20’000 employees and it was founded in… 1998. There is no doubt that our culture and financial support is not made to produce our own Google but I seriously believe that we should not be afraid of having large ambitions instead of criticizing an American model which also has great assets.

    Give back to the community

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    My sixth article in the newsletter Créateurs about high-tech success stories: Swissquote. I am leaving Silicon Valley after purely American stories with Adobe & Genentech, then followed by Europeans in SV (Synopsys, VMware) to talk about a pure Swiss success!

    Mark Bürki and Paulo Buzzi are the two founders of one of the nicest Swiss (not to say European) success stories: Swissquote. No link to Silicon Valley, no venture capital, an exception to what I am used to promote. “Just a” local online bank launched in 1997 as a spin-off of a software service company, Marvel, which was founded in 1990. Bürki and Buzzi did not launch their start-up in a Garage like HP, Apple or Google; worse, it was in a cellar! The beginnings were not easy, salaries were not always guaranteed…

    The USA played a role however. At a conference in Boston, the two founders discovered a new promising platform: the Internet. Sitting at a tiny booth, the founder of an unknown start-up, Amazon. Later, a contract with the IOC, the International Olympic Commitee, for the design of their web site, gave the much needed cash to Marvel. Marvel had also specialized in financial applications and Bürki could see the potential of the Internet for the consumer of stock and financial news.

    With a Zurich-based bank as a financial partner, Marvel launched Swissquote in 1997. The beginnings were very encouraging and at that time, most investment banks were competing for the fast-growing start-ups to be quoted on stock exchanges. Swissquote went public in 2001 with less than CHF20M in sales and a huge loss. The future would not be as nice as the pre-IPO boom and the burst of the Internet bubble threatened the mere existence of the company. But Bürki and Buzzi were not part of the mass of entrepreneurs who disappeared as fast as shooting stars. Decisions were tough, many employees were fired but Swissquote survived. In 2009, its sales were about CHF100M with a net profit of CHF35M, and its market capitalization was nearly CHF600M.

    In August, and then in November 2006, I had invited the two founders to share their entrepreneurial experience on the EPFL campus. They had explained the importance of a vibrating ecosystem, as they had enjoyed it in Lausanne during their studies, years before. “When we were students in computer science”, Bürki noticed, “the sixty or so students in the department belonged to about twenty different nationalities”, a diversity that can be found in the best technology clusters. Without any business training, they learnt how to manage a company with two hundred people. The two founders are convinced that you learn these things by doing. Two founders. Another important topic. Your co-founder can challenge you with the right questions that a lonely founder may not solve easily.

    Bürki also mentioned the vital role of the dream by quoting, in a rather surprising manner, Che Guevara: “Be Realistic, Ask for the Impossible.” As a reminder of their beautiful years at EPFL and also as a sign of their success, Marc Bürki and Paolo Buzzi took in 2008 a typically American decision by creating an endowed chair in quantitative finance.

    High growth and profits

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    Before I talk about the topic I announce in this post, let me mention briefly my coming back in the research world! I published a paper at the BCERC Babson Conference on Stanford high-tech start-ups. You may wish to go through the slides below.

    I promise to come back to growth and profits and indeed there is a link to my own paper so be a little patient. But I need to mention one other thing before! The two keynote speakers were great.

    First Ernesto Bertarelli, former CEO of Sereno and winner (and loser) of the America’s Cup with Alinghi gave a great 20-minute talk on entrepreneurship. Let me just quote him:
    – in entrepreneurship, you need passion, fire and love, these are critical,
    – you need a team, you can not win alone so you need to accept to hire better people than yourself and you need to accept change,
    – you need vision, i.e. you need to visualize your plan and objectives,
    – entrepreneurship = business, i.e. it is about taking chances, about asking yourself why should I not do it,
    – if you’re sure to win, it’s boring; the risk of failing is OK and he was honest enough to show his two victories and then his defeat with Alinghi.
    In summary, it is not so much a process it is about values.

    Second Nicolas Hayek, founder and chairman of the Swatch Group, gave his views about entrepreneurship and business. He said basically the same things. Entrepreneurs are creative people and the pity (with our current crisis) is that we train managers who are not risk-takers, who are not creative people (or only for creative finance!). In fact, we kill creativity with our kids when they are 6-years old and business schools / MBA programs do not change this.

    So now that I have mentioned typical keywords of entrepreneurship, (this above is not new at all, but the speakers were great and convincing), I can elaborate on the title of my post . At the Babson conference, there was a paper entitled “MUCH ADO ABOUT NEARLY NOTHING? AN EXPLORATORY STUDY ON THE MYTH OF HIGH GROWTH TECHNOLOGY START-UP ENTREPRENEURSHIP”

    As you may imagine, I was shocked. I was discovering a totally new field of research exemplified by Per Davidsson. High growth would not be as important as profits. Said this way, I do not think anyone would disagree. If you are interested, you should read “Davidsson, P., Steffens, P. & Fitzsimmons, J. 2008. Growing profitable or growing from profits: Putting the horse in front of the cart? Journal of Business Venturing” (pdf manuscript here) if you have the restricted access.

    The reason why I was shocked is that my experience with high-tech start-ups is that profits come later than sooner as you need to develop a product that no customer would pay for its development. So first you lose money, usually through funding by investors. Then you grow and generate profits.

    Indeed Davidsson is not saying the contrary: in his paper, he states that “For external investors, our results imply that high growth in a low-profitability situation is a warning signal rather than an unambiguous sign of positive development. However, we must caution that our results do not necessarily apply to the much more select group of high-potential firms that VCs invest in. First-mover-advantage (FMA) reasoning suggests radical innovators who create entirely new markets play under different rules to the average SMEs. This said, the lack of proof that size leads to eventual profitability is something that has concerned the very researchers who coined the FMA concept: (Lieberman and Montgomery, 1998:1122). Similarly, in the specific context of disruptive innovation, Christensen and Raynor (2003) have argued forcefully for patience for growth but impatience for profit, a notion directly in line with our ‘profits first’ arguments and findings for SMEs more generally. In combination with our results, this provides sound reason for external investors to put more emphasis on establishing profitability through VRIO resources within their portfolio of firms, and having more patience for the growth that can eventually realize the full value of opportunities developed and pursued by these firms.”

    So you could think I feel better. Not at all! The paper “Much ado about nearly nothing” by Malin Brännback, Niklas Kiviluoto and Ralf Östermark, from Åbo Akademi University, Finland and Alan Carsrud, Ryerson University, Canada seems to indicate similar results in high-tech to what Davidsson is stating for SMEs. More specifically, another paper, “Growth and Profitability in Small Privately Held Biotech Firms: Preliminary Findings” by Carsrud and his colleagues states that “A high profitability-low growth biotech firm is more probably to make the transition to high profitability-high growth than a firm that starts off with low profitability and high growth.” Well maybe there is no contradiction between my views and theirs. It might be that start-ups are about outliers and probabilities then are, yes, very low to succeed from low profitability. I am still convinced high value creation comes from there and still, I doubt you can focus on profits first, on growth second in high-tech start-ups. It is however an interesting topic which if true, entrepreneurs, investors, policy makers and researchers should know better about!

    Any reaction?

    What makes a good technology company? A mastery of fear and envy.

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    I’ve just read an article which nicely describes a feature of entrepreneurship and innovation that is not often discussed. You may read it in French as I have translated it in the French part of my blog, Qu’est-ce qui fait d’une entreprise de technologie un succès? Un mélange de peur et d’envie or you can go on the web site where the article was published, Is Elon Musk the Bill Gates of Green?. It is really its subtitle which is I think striking: What makes a good technology company? A mastery of fear and envy.

    For those who would not know, Elon Musk is the head of Tesla Motors, a start-up I wrote about in a recent post, Tesla Motors and Paypal a tale of two founders. Indeed the initial love story between the founders did not end well.

    So I think you should read Is Elon Musk the Bill Gates of Green?

    Morten Lund at St Gallen’s symposium

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    Do you know Morten Lund? You just need to know he was a early investor in Skype.

    He was recently in St Gallen, you can  watch his talk or read the interview below. Nothing really new, but quite interesting. Thanks to Jordi, for the link 🙂
    Jordi apparently read it on the new platform Inno-Swiss

    All that follows are Morten’s words, not mine…

    Here is a pretty good interview from the programme (with my comments):

    Speaking of “the entrepreneur” is always tricky, as there is no clear-cut definition. One way of approaching this problem is to ask entrepreneurs themselves what they think entrepreneurship is all about. Let us hear first from the serial entrepreneur Morten Lund (DK) who covers this year’s topic in a most comprehensive way. He is young, he is famous for having invested very early in the VoIP service Skype, he learnt the ups and downs of entrepreneurship the hard way and he is realistic about the outcome of entrepreneurial endeavours – even those of the St. Gallen Symposium.

    Morten Lund, there are a lot of investment opportunities out there right now. You, as an entrepreneur, must enjoy yourself a lot.

    I am bankrupt at the moment (I was when I did the interview), so I cannot do a lot, but then, on the other hand, I can help other people start mind-blowing businesses. In a downturn like this, most entrepreneurs move in the opposite direction to the cycle. When everything collapsed two years ago, a lot of people where investing in start-ups they did not know anything about. (Including myself)

    How this?

    The clever guys, they cashed in two and a half years ago ( I know quite some) and they are now buying up like crazy from all the bankrupt guys (idiots) like me. For real start-ups, like what I have been doing in technology, this time is, of course, amazing. The reason is that this technology is now mature. Both from the consumer side, as people are using computers all the time and they buy a lot online, and from the technology side, where it has become so easy to develop a website or a web service or to rent servers.

    For instance, you have the world’s biggest infrastructure at Amazon which you can just tap into with no set-up fee. So those two components, the e-side and the consumer side, work now and the developers and infrastructure are amazing, and then combine this with the fact that you can actually get developers because they have been fired and are much more realistic salary price-wise – that is all together probably the biggest opportunity in technology history.

    What is your part in this game?

    Imagine how we would have gone to the cattle market a hundred years ago and seen that perfect cow that gives milk, delivers some good babies and lots of meat you can eat. These are all the processes in the game in which I have been for over 15 years, creating companies, and through trial and error, finding those perfect cows that actually deliver (Christian and Assen – dont be offended :). And now, the technology and the people who want to buy and use it have combined in a way that suits someone like me perfectly. And that is, of course, a dream.

    Is it the right time for entrepreneurs? Are they agents of change?

    An agent of change for me is more somebody who is standing outside and wants to label people like me. But it is impossible to put a label on me. I am not a consultant, I am not an investor, I am not even an entrepreneur, I am many things in one.

    So what are you?

    I am mostly a guy facilitating a trampoline. I am the guy who dares to jump the crazy jumps on the trampoline and that people try out like a trampoline. I am facilitating a catapult. The best you can do now is to launch start-ups with good people, but you do have to have simply amazing, crazy, smart, good, cool, nice people, because these kinds of people can challenge SAP in one of their niches. But they have to be amazingly smart, hard working, into their stuff and vibrant. And they have to complement each other perfectly. Then, with added luck, it is possible.

    What are the ingredients of entrepreneurial success?

    Entrepreneurs are executing a vision and turning it into reality. You need a lot of skills in that process – accounting skills, sales skills, people skills, science skills, presentation skills and so on. The entrepreneur closes his eyes and lowers his hands, then uses all he has himself and reaches out to the world for the best of the competences to make it happen.

    He has to be smart and trustworthy and socially strong enough to make his thing take off. How many times have you drawn your small ideas on a piece of paper for your friend but they never became reality. It is the entrepreneur who has the (mental) capital to get the idea off the piece of paper and into sales.

    It is about skills, but it is also about luck, is it not?

    In my world everybody knows that you have to work superhard (and be disciplined like hell). But then remember, there are global opportunities with technologies and the internet, but there is also global competition.

    There will be another two hundred start-ups, some in the same market as you, so you also have to be lucky to break through or to find the right people or to chose the right strategy or to find the first client and adapt all of those things as you go along. You always have to acknowledge luck as part of your entrepreneurial success.

    And sometime you fail.

    That is why I am apparently so interesting. A lot of people tried what I tried, they have been categorised either as geniuses or losers. If you are one of those people in history who actually dares to talk about the fact that you failed, it seems very strange. And Ooh! If you are honest and talk about failure, that seems to be very new.

    Do we need more of a failure culture?

    Maybe we do have to be more realistic. So when we have an entrepreneur symposium at St. Gallen, we could also have a failure symposium because failure is much, much more likely than success if you are an entrepreneur. But you do not want to talk about it. I mean, eight out of ten seminars fail. It is very important for you to have the courage to say “I will”, “I can”, “I dare to do this”, but also “I can and dare and see that I can fail”. Then you become really strong.

    But is the entrepreneur as an individual not massively overrated?

    Again, you want to put a label on it, you want to categorise people. There are very few one-man brands in the world. Michael Jackson did it. (But)Everybody would acknowledge that he needed the band to create the music. In entrepreneurship, as well, you have the initial guy who starts something or who finds the team. But entrepreneurship is much more about team work and group effort.

    There is a saying that true entrepreneurs are long-term oriented. But your entrepreneurial career does not reflect that in any way.

    I would love to have a long-lasting business that I could keep forever (EVEBREAD = Everlasting Bread and is my dream of a such company). I would love to have this green tech company that purifies water of which I would be the proud owner forever. I think we all would love that. But with entrepreneurship you really have to remember that the entrepreneur can take the idea off a table and turn it into some kind of sales or product. The big corporations will then be so happy to buy this when it works, because they know how to make a critical thing huge. That is why they have a big corporation.

    They do not believe they can be innovative at the same level, so they want to buy as soon as an entrepreneur has started. And they are much better at the managing game when you get to a certain level. So I get in quick, get out quick, it is true. Because it pretty often happens that you cannot say no if somebody wants to buy your stuff. The entrepreneurs in charge can get a lot of money, and most of the entrepreneurs, me especially, will take this money and do more of what they did before, meaning turning ideas into reality.

    In your opinion, what is the best political and social context for entrepreneurship?

    Put crudely, the best model for entrepreneurship in history is the model of American society, because it has created the Gates, the Carnegies and most of the biggest companies we know in a very short time. The Americans can beat anyone and every start-up because they always have the best start-ups and the most successful (financial eco-system until now). Talking about the best social model or political climate for entrepreneurship, I think we have been pretty lucky in the Scandinavian countries, but I doubt whether it is sustainable. (China and India will eat us alive :)

    You have to be hungry to be a successful entrepreneur. You have to want to prove to the world, especially coming from small countries like Switzerland (and Denmark), that you can do it. The Nordic model makes people too demanding, they are not hungry any more (dinner is served for free no matter how stupid you behave). That is unfortunate, because I love to live here. Denmark is facing some real shit now. It will be very difficult to keep up all these crazy standards of social living.

    Are entrepreneurs role models?

    Yes, because we think that entrepreneurship is something we want (have) to do. But we forget that being an entrepreneur can mean failure. Successful entrepreneurs are role models, but seven out of ten entrepreneurs are not role models because they fail.

    Interview: Johannes Berchtold

    40th St. Gallen Symposium

    A Swiss in Silicon Valley

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    Here is my fifth contribution to Créateurs, the Geneva newsletter, where I have been asked to write short articles about famous success stories. After Synopsys, women and high-tech entrepreneurship, Adobe and Genentech, here is an short article about a Swiss founder in Silicon Valley.

    Do you know Edouard Bugnion? I am not sure that Switzerland knows about its child, who grew up in Geneva and Neuchâtel before graduating from ETHZ (Zürich) in 1994 and moving to California where he obtained his MS from the University of Stanford in 1996. Yet he is the co-founder of VMware and Nuova Systems, two recent success stories from Silicon Valley.


    Edouard Bugnion with the author in the middle of « cubicles » at Nuova in May 2006 (Picture: Mehdi Aminian).

    As I was preparing a short trip to San Francisco, I had been advised to meet this Swiss citizen that I had never heard of. The meeting was planned in his office which we found thanks to a quickly printed logo posted on his door: Nuova Systems. The place was gigantic for a start-up which was less than one-year old. But Nuova was hiring fast. I should add that Cisco would soon invest $50M in the start-up. Why so much money? Because the founders of Nuova were exceptional: Mario Mazzola had just left Cisco and had also been the founder of Crescendo, the first start-up acquired by Cisco (in 1991). Edouard was one of the five co-founders of VMware in 1998, which was bought in 2004 by BMC for $625M. VMware was so successful with its virtualization tools that BMC gave back its independence to the company which is today quoted on Nasdaq (its market capitalization was above $10B at the end of 2009) and has more than 6’000 employees and $1.8B in sales. Nuova has been acquired by Cisco in 2008 for $600M.

    When I told my surprise in front such a big office space, Edouard told me the story that when VMware had grown to a workforce which forced the company to move, the company proposed to lease its old offices to a small new start-up. Its founders looked at the place and declined: “Too small!” The start-up was unknown and its founders were very young people. Edouard was as surprised then as I was when we met. Was it ambition? Was it arrogance? The start-up was Google and its two founders, Page and Brin, were, without any doubt, visionaries


    Nuova’s front door logo in May 2006.

    Edouard might be qualified as a school dropout. Even with his diplomas from ETHZ and Stanford, he quit the Stanford PhD program in 1998 to launch VMware with his professor. With $20M of venture-capital, they could grow the company until its acquisition six years later. In 2000, he gave an interview to SwissInfo. With 120 employees, VMware was only two years old. “In Switzerland, young entrepreneurs do not dare dreaming about such a scenario. If you have a good idea, you can find a few million and your product can reach the market for better or worse.” Such is the quote from the author of the interview, Pierre Godet, who, then, says his concern about this brain drain. Bugnion is more optimistic: “Swiss people in Silicon Valley develop a very unique experience, as well as a network. Then, most of them come back to Switzerland at some point in their professional life.” It is one of the theses in my book. It may be a good idea to go and work in the Bay Area, a region where anything is fast, very fast, where ambition can be expressed and where failure is tolerated. I hope that someday, Edouard will come back to Switzerland to tell his story himself and share his experience and know-how…

    A123, Boston and Atlas

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    I just met this morning Fred Destin in the beautiful Rolex Learning Center at EPFL. We both have a passion for entrepreneurs and architecture!

    Fred told me he liked my equity tables and pies (check skype, mysql, Kelkoo, Synopsys, Genentech, Adobe, or the general one.

    So as a small gift to Fred who is moving to the Atlas office in Boston this summer, here is the equity case of A123 Systems, an MIT spin-off which went public last September.

    I am aware the pictures are not very nice but you can enlarge them and ask me for the excel file…

    Lessons from entrepreneurs: not intuitive!

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    One of my favorite entrepreneurial web site, the Stanford Technology Ventures Program, just published its new batch of short videos.

    The lessons are quite interesting as I found them not intuitive and quite uncommon:
    – you do not have to work too much
    – you should do what you love
    – there are not rules.

    So here is the first one: Great Ideas Derive from Well-Rested Minds. “Being a workaholic is no guarantee of success. David Heinemeier Hansson points out that 37signals’ main product, Basecamp, was created on 10 hours a week of development for a total of six months. When you’re overworked, you can’t think creatively.”

    What about next: Do What You Like to Get Where You Want. “John Melo, CEO of Amyris Biotechnologies, enjoyed building oscilloscopes, circuits and transistors – and yet he was a college dropout. In this clip, Melo comments on his non-linear career path and how his passion, personal interest, and sense of independence have propelled him from one episodic position to another. He states that he first looked for opportunities to do the things he loved to do, and then focused on the places he wanted to be.”

    Finally, Entrepreneurs Have No Rules. It also says: “Never give up the title of CEO… In many cases, it is the founder who is able to provide the vision to effectively direct product development.”