Thursday, February 28

MIT Entrepreneurship Center

It was interesting to visit the MIT Entrepreneurship center as I could see how much weight MIT has put behind its entrepreneur focus. It’s not surprising they are considered one the best colleges for entrepreneurs, especially regarding their 100K competition when they have a center and dedicated staff at the university, even if it is only run by 5 strong full time team. The center being outside the remit of the other schools seemed to be an important aspect of the success, along with the strong alumni network MIT has.

We had an interesting discussion with Bill Aulet regarding business plans and how they could be successfully implemented as a PowerPoint presentation. If you are able to create a 10 slide version of your plan, that acts as a plan of execution for your business.

He also went through the areas that a 100k plan would be marked on, in the areas of opportunity and risk. These are:
• Market
• Execution
• Team
• Plan
• Competitive Advantage (tech)
• Financial
• Other i.e. Green energy, political implications (where appropriate)

Further details on this were that the market needs to be broken down into manageable steps, rather than looking at the market as a whole. The example was you can’t just say you’re going to sell cars to 1% of the market, need to look at it on a much smaller scale.

Gross margin is an important consideration, and something that hasn’t been touched on yet. Bill said that you need to be careful when presenting the margin, near to 10% is what a distributor has, and 90% is Microsoft, which is very difficult to achieve and would be hard to convince a panel, or VC that you could work with this percentage.

Competitive advantage is usually thought of as tech, but can also be critical mass of customers, or even having customers locked into your system. Having the best technology is not always necessary, and often overrated by the entrepreneur. Speaking of VC’s he warned that all they care about is Internal Rate of Return (IRR), it’s what they are rated on and the most important figure to them.

Once you have a plan, it should be signed by all management so that they are all in agreement with its contents, and are all dedicated to its success. The plan needs to convince a number of people that it will be successful. Intially this is you, then your team and also your customers. Finally your mother, meaning it should be easy to understand. At all times it should stir up passion and excitement, only then will it be ready for others to look at.

An invention on its own is like counterfeit money, it’s not worth anything until it’s commercialized!

Innovation = invention + commercialization

Even if there is no competition in the market, then you need to explain why. If there is no competition, this will flag warning messages in anyone’s head looking at the plan. It’s best to frame it as, even though there is no competition right now, you recognize there will be in the future. It’s also a bad idea to compare your new product with a product a competitor already has on the market, they will often have new products with your functionality in the works that you don’t know about. A better way to look at them is to find out what they are competing on, and differentiate yourself that way.

One thing I was disappointed with regarding the center is their concentration on graduate and PhD students for the programs and not undergraduates. One thing I have learnt since being on this fellowship is that you can never start too young in teaching entrepreneurial practices and if you are introducing the practices to school children, then the opportunities should also be there for all students. It was also interesting to hear that they haven’t achieved any increase in students that wish to pursue entrepreneurship who finish at MIT compared to when they start.

I don’t want to sound negative, but have a few other observations about the center. They rely on donations from local businesses and past students for funding, which account for 70% of the income. This doesn’t seem like a sustainable business model to me, and could suffer in the future. It also appeared that the classes were generally given by lecturers at the university, and they rarely used active businessmen.

It was great to hear from Bill again, he really is an inspiration and has so much knowledge and insights into the process we are all going through its scary. I would jump at the opportunity to spend more time with Bill and his team.

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