This book is written by one of Switzerland’s top serial entrepreneurs, Anil Sethi, who founded Flisom in 2006, and lead the company through 2012, when it went public (IPO). Sethi is an “Entrepreneur in Residence” at ETH Zurich and have been honored as a Technology Pioneer by the World Economic Forum. His company, Flisom, has also received numerous prizes, including the Pioneer Prize (from Zurcher Kantonalbank) and the Red Herring Award. Flisom’s business niche: the making of ultra-thin photogenic film for electric generation.
The author states that this book is neither about the development of “route to market” ventures (page 19) nor about what he has labelled “emotional”/”painful” start-ups (page 20). Rather the book’s main focus is on how to build on unique technological insights so as to develop sustainable business (see, above all, chapter 3, pages 17-33). The author competently deals with what seems to be a comprehensive set of issues for achieving this, in the book’s twelve chapters.
Before reviewing the various parts of the book in detail, it should be noted that there are summary take-away statements throughout the text, and repeated at the end of the chapters, 75 in total (chapters 2-8), as well as five useful case-studies illustrating various forms of business success (chapter 10). The book is thus both insightful and practical. The author draws heavily on his own experience. As such the book might perhaps also serve as a source of reference in addition to providing an arrow of useful take-aways, which perhaps become particularly clear when reading through the book as a whole.
In the prologue (chapter 1) the author presents the dictum of clarity for what to do as well as what not to do, and that, sooner or later, this agenda is indeed likely to come about. Thus, personal vision and aspirations are much more critical from strategic plans and financial projections!
Are you meant to be an entrepreneur? While many of us shall undoubtedly prefer to answer affirmatively to this, the author raises several “requirements”, which may make one’s answer less obvious: Are we having a clear vision? Are we predisposed to move quickly? Are we ready to break conventional rules? This is covered in chapter 2. And Sethi elaborates on this further in chapter 3. Businesspeople might be distinguished from technology “owners”/scientists, the latter group typically lacking understanding of what makes customers tick. And scientists may also resist leaving their laboratories!
In addition to clarity, discussed in the first two chapters already, the author also identifies the readiness to scale up (versus “remain” in the lab), as well as geography. B2B is probably more relevant to this book than B2C, as long as one should not fall in love with technology, and particularly not when customers’ needs might therefore be suppressed! Relatively small, simple steps, patience and team involvement are critical. Many individuals may not be up to working effectively this way!
Is one’s technology ripe for commercialization? One good way to assess this might involve being able to observe how a given technology is working in one setting, for the entrepreneur to simply transfer this to another geographic setting. A famous example is how the Austrian businessman and entrepreneur Dietrich Mateschitz discovered the basic concept of a power drink in Thailand, for so to transfer the concept to his own country and develop it further, so that it became Red Bull. A more general approach to evaluating a technology might be to assess the degree to which a given technological approach might be replicable. Is there a “proof” of concept? And it might be wise to pursue several technological options when it comes to this, as long as one keeps in mind that technology- people often prefer to do more research (and more, more, more, ...) often failing to see that manufacturing and/or marketing might impact the validity of a chosen approach too.
Now to the team (chapter 5). To have a strong team in place is always important. The author spends more than 20% of the book on this, and more than 1/3 of the summary questions relate to this chapter. As an opening argument, the author emphasizes that the entrepreneur’s spouse should indeed be in the extended team, so that she (or he) might more readily support all the hard work, personal sacrifice, and blood, sweat and tears, to quote Churchill. And some team members, perhaps founders in particular, may be impatient, be greedy, and ask “when can I exit?”. Teams must have a long-term commitment, in contrast.
There shall of course typically be changes, and at times rather fundamental shifts, these might test the basic commitments of team members. There might be dilutions and loss of control, often coming from conditions imposed through new financing, such as loans (even “soft” loans from the public sector). There may also be a need to change the overall vision. Back-up technologies might make this more feasible. Again, however, the team members must be ok with this!
Team members might typically be willing to settle for relatively low on-going salaries, (“work on two cups of coffee per day”, as the author experienced) and instead be willing to settle for stock options. Retired executives, often with an abundance of experience, may be good team members, as long as they do not contribute to “over-engineering”. Good, honest, open communication is critical, and any type of friction within the team should be minimalized/avoided.
Now to patents (chapter 6). Patents may be key for protecting one’s discretionary technology, but they provide freedom to operate for only 20 years! Ironically, it might be that protection of proprietary technology may have to be developed not only opposite competitors, but also with regards to team members who might have departed. It might however also be that one would decide to choose the route of developing trade secrets (such as Coca Cola for instance, more than 120 years trade secret associated with its formula!). The more patents the better! This might not only keep more options open, but also generate more liquidity when selling.
Choosing good investors is also paramount (chapter 7). Whom to target should be carefully planned for. To avoid investors who have histories of conflicts represents red lights! The author discusses five archetypes of investors:
Angel investors – early; typically, relatively small investments.
Venture capitalists – often somewhat late in a venture’s evolution, and often also relatively larger investments.
Strategic – when the venture fits into the strategy of the financing entity.
Funds – these might typically have set time horizons for exit, hence strong focus on exit.
Foundations – these often tend to put relatively lesser focus on exit.
To come up with a proper valuation is crucial for all these types of investors. While there does not seem to be an exact formula for coming up with this, a combination of idea, plan, technology, team, prototype, and customers might do it!
To close the deal and thus to secure funding is next (chapter 8). To be realistic seems particularly important here, and not to take any signals from various investors for given until a deal is signed. One should keep in mind that investors typically evaluate many deals, and that they have low risk by saying no! To shop around may be ok, but one should be aware of the transparency that is quite common among investors, and thus the risk of involving too many prospective investors. But, to have two realistic investor candidates seems perhaps optimal. A consortium of investors tends to be difficult to coordinate. These take time, energy and patience! And “hang in there” as the old proverb says. Never give up.
When a letter of intent is drawn and signed (a milestone!) these issues seem particularly critical:
An investor will typically ask for exclusivity during the period that now follows, until final signing. It is important not to promise too much here!
Eventual liquidation is key. Most investors shall prefer to be paid back before others. What is fair?
Ethics. The entrepreneur should be clear regarding what he/she is ready to accept. Is it fair for all involved?
Now comes the exit and the opportunity to convert equity to wealth (chapter 9). Until now, imaginary values may be considerable, but since nothing shall actually be realized, what is it worth? There is not much to add here, beyond what was covered in the previous chapter, except perhaps to add that some funds might be more or less forced to sell at some predetermined point, in line with the given funds’ bylaws. There might be good opportunities for others to utilize this, according to the author.
We shall not discuss the five case studies given in chapter 10, except for stressing what seems to be two recurring features associated with the successes in all five cases:
They have all been flexible, willing to revise plans and visions.
They have particularly strong contacts with their customers, i.e., the revenue-generating side.
In the two final chapters of the book, both short, the author reviews what might be seen as the status of entrepreneurship in the US (particularly in Silicon Valley), in Europe (Switzerland in particular), in China, Russia, India and the Middle East (Israel). The author then discusses what might be key drivers for various entrepreneurs, and he reveals some major surprises he has had as part of his own entrepreneurial journey.
This book is great. It is comprehensive. It is written by a proven expert, and thus is highly credible. And even though it is fully packed with insights on the entire array of issues characterizing venture development, it is nevertheless clear and easy to read. The many practical examples and summary takeaways add to a good feeling. As I said, a first reading is likely to establish the base for a follow-on use of the book, for references and specific factual “advice”.
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