Author Archives: Hervé Lebret

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.

Boulevard of Broken Dreams

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A colleague of mine (thanks Jean-Jacques) recently mentioned to me this book by Josh Lerner, which full title is Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed–and What to Do About It. I was all the more interested that Lerner is the author of many academic papers on high-tech entrepreneurship, and particularly of one about serial entrepreneurs: “Performance Persistence in Entrepreneurship” [pdf format here] with Paul Gompers, Anna Kovner, and David Scharfstein, Journal of Financial Economics, 62 (2007), 731-764. I will come back in the future on this topic which I am currently studying.

So what should we do about the public efforts is what Lerner is trying to help us with and his answer shows how challenging the topic is. What is beautiful about the author (my personal point of view) is that he likes history (just like me). Just like Steve Jobs! Just read again what I posted about Jobs on mentors; “You can’t really understand what is going on now unless you understand what came before”.

Lerner’s initial chapter is “A Look Backwards” He shows how entrepreneurs and investors benefited and suffered from each other in the 70s and 80s, including the excess of speculative bubbles, the PC burst of the 80s for example. He also shows how important public support was in the very early days through the funding of research (mostly the cold war militaries) and the legal actions to ease venture capital (SBIRs, Erisa Acts) so that he does not really agree with Rodgers (founder of Cypress) who wanted government out of Silicon Valley (page 32) so that he claims that “The Public sector did play a key role in shaping the evolution of Silicon Valley” (page 35).

Then, in the following chapters he shows how complex it is to find facts: “consistent information on venture-backed firms that were acquired or went out of business doesn’t exist” (page 59) which means that quantitative analysis is rare. And remember he is a respected academic, so he knows! What he tried to do then, is to show some of the obvious mistakes: incompetence in allocating public resources (page 73), capture, that is use of subsidies by the wrong groups (page 80), by “organizations that are mandated to help entrepreneurs” (page 83). “Seven of the incubators gave less than 50% of funding in cash to incubated firms” (just one example from Australia, page 84) or the SBIR program which has exhausted its usefulness (page 85).

So his advice is:
– enhancing the entrepreneurial culture (page 90) [through the right laws, the access to technologies, tax incentives and training],
– increasing the venture market’s attractiveness (page 100) [through allowing partnerships, creating local markets, accessing human capital abroad],
– avoiding common mistakes: timing [be patient], sizing [not too small, not too large], flexibility [learn by doing], create the right incentives [and here it is a complex situation as perverse effects from good ideas often occur] and evaluate [which does not happen often enough].

Indeed, his introduction (pages 12 and following ones) summarized it all: you need rules, experience, time, incentives and assessment. But with all his experience and knowledge about high-tech entrepreneurship, Lerner is very humble with the lessons: the topic is really complicated, all these advice have to be implemented together and it is really their careful interconnections which will make an ecosystem lively or not. Then it is my personal conclusion that such favorable conditions will be useful if entrepreneurs use them intelligently. So the reason why all this fails has many roots…

I cannot finish this post without comparing it to my book. It is indeed very similar in its conclusions with slightly different facts and figures. So you would learn complementary and consistent things by reading both! My thesis is we need an entrepreneurial culture and access to people from Silicon Valley who have the experience. Everything else is necessary but not sufficient.

There will never be another Silicon Valley

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Well who am I to predict the future? In fact I do not know but I really doubt it. Famous bloggers have mentioned the topic again recently. In Techcrunch it was Can Russia Build A Silicon Valley? by Vivek Wadhwa. And in the Equity Kicker, it was Building an ecosystem to rival Silicon Valley by Nic Brisbourne. I reacted to both in the following way:

What a topic! Clearly something which has been around for… at least 35 years (I mean how to replicate SV). The fact that we still discuss it shows how complex it is. It has been my main concern in the last years and for the beauty of the debate (that’s what blogs are about, right?) let me play the devil’s advocate fully. At an extreme, I do not think there will ever be another Silicon Valley. For example, Kenney claims in his book on SV it requires 5 basic ingredients: universities of high caliber (Stanford and Berkeley in SV), a strong investor base, service providers, high-tech professionals (who accept to leave their big companies for start-ups so from Intel, Cisco, Apple, MSFT, even Google now to the next wave) and last but not least an entrepreneurial culture. All this is not easy to gather. But even worse, SV was probably an accident, a monster which was never successfully replicated. Saxenian showed in Regional Advantage how even the Boston area failed and the fact that Paul Graham moved ycombinator fully out of Boston to SV is just another sign. In Europe, Sophia Antipolis was a first experience … in 1972 so? So you need a rare combination of ingredients in the recipe and hope the oven is at the right temperature for a long, long time. Now I am playing devil’s advocate so things are not so bad. As a positive reaction, let me add my own analysis: I am not sure governments are good at innovation, they are good at stimulating research. The US federal govt has put billions through DARPA, NIH, DOE, etc, and this obviously helped Stanford, Berkeley to be the best universities worldwide (see the rankings) and the Internet to be created. Long term investment in infrastructure is what gvts are good at (education, research, transport…) Then, yes, bridges with SV are critical. It is exactly how Israel, Taiwan, then India and China have been successful with their diasporas. Countries should invite back the experienced migrants. When he has time, Brin should help Russia or Levchin Ukraine, or even Grove Hungary etc… I am less sure tax credits, admin, legal tools have been so useful in the 50’s, 60’s and 70’s when SV was its in early days. As a conclusion, it is and will remain for a while a great topic.

Of course, my reaction was not as important as the source of the posts: Russia wants to be more innovative and commissioned a report to assess experiments of innovation ecosystems. The result is the following report: Yaroslavl Roadmap 10-15-20 (pdf format.)

There isn’t anything really new in this report, at least for innovation experts. But it is a very good synthesis of what the USA, Israel, Finland, India, and Taiwan have tried, be successful in, but also in what they failed.  The historical summaries are great and full of good lessons. I had the feeling the authors put too much emphasis on infrastructure vs. culture. It is my own bias again! They mention culture a lot, but they may be aware also that it’s the most difficult thing to create… If you like the topic, you should certainly download and read the pdf, and build your own opinion.

Innovation at Google

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Google is famous for its innovation. You may check my now-old powerpoint on the company. Their “as-famous 20% free-time” to create is certainly one of their key features.

The MIT TR35 awards (35 young innovators under the age of 35) celebrate again this unique company by including Wesley Chan in this group. Wesley Chan is an investor with Google Ventures. He was also the one who discovered and then acquired the people behind Google Analytics. You may want to read what the MIT Technology Review says about him in this pdf document.

I extracted a few sentences by Chan from the document which are very consistent with Google early history. The search engine may have grown, some of its roots still emerge:

– Without much money in the bank and under heavy competition from a dominant market leader, they proved themselves able not only to survive but to thrive.

– Skeptics inside Google pointed out that Urchin was not the market leader or even the bestknown among the 30 analytics providers we considered.

– They were the best founding team around. Great founders need the technical aptitude, motivation, and personal skills to make a product take off. […] Great founders understand how to deal with unprecedented issues and come out ahead. […] When I fund a company, I’m looking for people with the kind of potential that Urchin’s founders displayed: extraordinary entrepreneurs who can build game-changing products.

Nic Brisbourne recently analyzed Google’s acquisitions in his blog, the Equity Kicker. You can also find them on Wikipedia. If you compare Google’s to Cisco’s acquisitions, you may see a distinctive difference: Google has a tendency to pay less and to buy start-ups much earlier. It is quite an interesting strategy (though Google seems to pay more these days).

(Important) Post-Scriptum: writing about the MIT TR35 innovators, I must add that for the first time, an EPFL innovator is celebrated together with Google. Jochen Mundinger is a founder of routeRank and I have been lucky to meet him. Jochen is a great entrepreneur!


© Alain Herzog, EPFL

What is the mentor role?

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I recently read Fred Wilson’s post on The CEO Mentor and Coach. As usual his post and the high number of comments are interesting. I would just like to add one of the best descriptions of a mentor I have read. It is what Robert Noyce represented for Steve Jobs. You can find the full account in the book The Man Behind the Microchip by Leslie Berlin or in a shorter account she gave for the Computer History Museum (pdf file – 6MB).

So here is a short account of Noyce’s mentoring!

“Bob Noyce took me under his wing. I was young, in my twenties. He was in his early fifties. He tried to give me the lay of the land, give me a perspective that I could only partially understand. You can’t really understand what is going on now unless you understand what came before”

“When Noyce left daily management at Intel in 1975, he turned his attention to the next generation of high-tech entrepreneurs. This is how he met Jobs.” Noyce was not attracted initially by the hippie style, “but over time, Noyce’s feelings about Apple began to change. This was due, in no small measure, to Steve Jobs, who deliberately sought out Noyce as a mentor. (Jobs also asked Jerry Sanders and Andy Grove if he could take them to lunch every quarter and “pick your brain”). “Steve would regularly appear at our house on his motorcycle” Bowers [Noyce’s wife] recalls “Soon he and Bob were disappearing into the basement, talking about projects.”

Noyce answered Jobs’ phone calls – which invariably began with “I’ve been thinking about what you said” or “I have an idea” – even when they came at midnight. At some point he confided to Bowers, “If he calls late again, I’m going to kill him,” but still he answered the phone.

Jobs agrees that his relationship was almost more filial than professional. “The things I remember about Bob are the personal things. I remember him teaching me how to ski better. And he was very interested in – fascinated by – the personal computer, and we talked a lot about that.

Intuitive Surgical

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Here is a start-up that I heard about through various channels. As I am not an expert of medical technologies, it is not too surprising that this 15-year old, $10B company was unknown to me. You can learn more about Intuitive Surgical from their website or from answer.com. 15-year old? You may tell me it is not a start-up anymore, but it surely was! as I often do when I discover such companies, I studied its growth and its capital structure at IPO. Here they are:

What is interesting is that despite its impressive growth, Intuitive’s IPO was not a huge success. It raised little money at a price per share which is not the typical $14 that I often see with Nasdaq IPOs. It was only $9 per share. When I published this blog it was at $275!! (see the chart at the bottom of the post)

Final comment, Intuitive was based on technologies from research centers, which licensed these against equity. You may be interested in what MIT and SRI International got for their IP.

A start-up is a baby

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I’ve been using this analogy a lot in my talks or courses. Fred Wilson has been using it to in his latest post, The Expanding Birthrate Of Web Startups.

In my talks, the slide is the following (you can check slide 61 in the pdf I posted in Start-Up, the book: a visual summary):

In full text, it is again
– Do parents know about educating a baby? so why do we say to founders to gain experience first?
– Do parents control everything it does, forever? so why founders are so paranoid about losing control?
– Would they give/abandon responsibility to teachers, doctors, “professionals”? so should not founders just hire the best people to increase chance of success?
A start-up is a baby which needs to grow and its founders should help it succeed (and yes your start-up baby is the most beautiful on earth… )

Finally, I usually add, maybe because I am a bit traditional, that I strongly believe single-parent families/companies are tougher for the kid so find a partner, never found a start-up alone.

What’s interesting with Wilson, is that he helps me enrich the analogy with parenting, so he sees the investor, not the founder as a parent. For me, the investor is a mentor, a godfather… so here are a few comments related to the analogy in his post:

– “I am committing to the care and feeding of the company until cash flow breakeven (the startup equivalent of adulthood)” (Wilson himself)
– “I worry like a parent with too many kids. Who is going to take care of all of these kids?” (Wilson again)
– “Parenting is a good way to put it. Unsure about the “pulling the plug” comparison though, doesn’t go very well with parenting!” (Loic Lemeur)
– “The super-angels and the angels, don’t try to play “parent”. They play friend. It’s a mutual benefit relationship, but the ultimate control is to the entrepreneur. Usually the friends and family who are excited about your seed round (when you leave their company), are not thinking about follow-on.” (Prasanna Sankaranarayanan)
-“do you think the “orphaned startups” will suffer because their “parent investors” remove themselves” (Adam Wexler)
-“an environment not unlike pre- or emerging-industrial third world nations. High infant mortality, the necessity of conserving scarce resources for those infants with provable indications that they CAN survive the initial impediments. It doesn’t mean that the parents love or value the survivors more, but rather that as a practical matter there are few options. […] if a ‘gifted child’ is to be sustained through the vagaries of infancy, then it’s important for both the company and the investor(s) to consider this up front. […] When, at the outset, it becomes clear that substantial investment in capital equipment, research and development, or extended operation at a loss is required if a ‘gifted child’ is to be sustained through the vagaries of infancy, then it’s important for both the company and the investor(s) to consider this up front. ” (Rich Miller)
– “We make fun of parents today who enroll their kids in the right kindegarden so they can get into Princeton, Yale, Harvard, but perhaps they aren’t so wrong if we applied that logic to startups….what do you need to do as an early stage company to ‘get into the right school’ when you come of age?” (Dave Hendricks)
– “But that’s not good parenting… if you want your child/portfolio company to succeed long term, you’ve got to consider where the road will take you, because the easy road/early exit isn’t a lock and is usually a lot harder than you think” (Reece Pacheco)
– “History: birthrate without control produces malnourished kids.” (Agilandam)
– “Short answer: A lower % of these “kids” will make it to their 3rd birthday.” (Andy Swan)
– “I thought you were going to make a separate point, that there aren’t enough acquirers — Google is active, Microsoft, Yahoo and others much less so — to adopt all the kids who don’t go public.” (Glen Kelman)
– “If programs like Y Combinator are getting our smartest kids to start companies instead of going to law school, McKinsey etc then that’s going to lead to good things for our industry and our economy.” (Chris Dixon)
– “Also… you say that entrepreneurs should find a one or 2 VCs and have a long term relationship with them. Isn’t this true for VCs too? Doesn’t it make sense to have the same investors lead the company from birth to adulthood and not one VC for the “toddler” period, one of the “child”, one of for the teen? If we take that analogy a little bit further, we know that foster kids who are taken from foster family to foster family usually don’t end up as “well” as the ones who get the same frame all along?” (Julien)

So the analogy has some value. You can react…

iPad vs. Kindle

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As I just mentioned in my previous post, I converted the English version of the book Start-Up to the Amazon Kindle and Apple iPad/iPhone formats. I will describe here what I faced as challenges and output.

The Amazon Kindle first.

It was relatively easy to do the job. I just add to save my Word version of the book into an HTML file. Well, almost. First, the table of content did not have direct hyperlinks, which I had to build. And at the end, it was not really a meta-table of contents so that you can click on the links (on the iPad version of the Kindle) but there is no real table of content. Second, the tables of data were just awful, so I had to convert them to JPG pictures. Then I just had to become a member of the Amazon DTP platform, fill in my details and upload the file. Their validation was fast and the Kindle version is available since late July. As I wrote in my previous post, the main weakness I saw is that on the iPad version of the Kindle, I could not enlarge the pictures (whereas I can do it with an iBook). Other weaknesses: the table of content is not good; and the chapter titles are small. Finally, I still do not know why they sell it for $11.99 when I asked for $9.99.

Now the Apple ibookstore. This was much more challenging!

Preparing an ebook is not as simple as I thought. In my simplistic views of electronic books, I thought that PDF would be an ideal format. I was naïve! If you want to read ebooks on a laptop, Adobe Digital Editions (http://www.adobe.com/products/digitaleditions) as well as Calibre (see below) provide a good reader for your laptop.

Now Apple was tougher. First I had no clue if I should become a developer or a content provider (http://www.apple.com/itunes/content-providers). Fortunately enough, being a content provider is good enough and free! Once you are registered as content provider you just have to let Apple validate your file. Well one minute! To become a content provider, I had to download iTunes Producer which works on Apple computers only!

Then you have to do much more work than with Amazon! First they want a EPUB format. You need to create such a file from the same HTML file required from Amazon (you can use Calibre, www.calibre-ebook.com) and you need to validate it with epubcheck (code.google.com/p/epubcheck). I had many bugs and had to use an epub editor. Sigil was good (code.google.com/p/sigil). But I still had to do some hand work and I would quantify it as a few days of work of editing whereas Amazon only asked me about a day.

Finally, Apple annouces it takes them up to 10 business days to do the quality control and it is about what it took. I do not have a Kindle so I cannot judge the result. There were a few buyers but I did not get any feedback yet. I have an iPad with the Kindle reader so I could check the results as I said previously. The experience was better with iBooks but better than I feared on the Kindle platform provided for the iPad.

Finally, the iBook seems to be available through the USA, Canada, UK, Germany and France only and apparently the countries which have agreements with those. Switzerland is not part of the group so I would not be able to buy it from home… too bad for Swiss residents!

Start-Up on iPad-iPhone and Kindle

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It’s done! I just made the book Start-Up available on both platforms, the Apple iBookstore for iPad and iPhone and the Amazon Kindle. I also checked bother versions so let me share with you a few things from the experience.

The process with Apple was the most painful (more in my next post). Is it because they have a higher quality control? I am not sure. The main difference is that you can click on the pictures with Apple whereas on the Kindle, I could not find a way to enlarge them. It is a weakness in my case given the amount of data in the tables. I also noticed I did not master well the tables of content for the Kindle…

There is also a small mystery, a mistake I may have made: both versions should sell at $9.99 but Amazon sells it at $11.99 and I have no clue of the reason why!

More about the experience of publishing an eBook in my next post!