Tag Archives: Entrepreneurship

The Science of Startups: The Impact of Founder Personalities on Company Success

When a young colleague of mine (thanks Amine!) mentioned a paper entitled The Science of Startups: The Impact of Founder Personalities on Company Success, I was intrigued not to say interested. You can find the version published on Nature here and the one on arXiv there.

When I look back on the 741 articles of this blog, 118 are tagged with founders, coming only second after Silicon Valley. Most of them deal with facts and figures but 38 mention the term personality. For example:
– Knowledge, skills and personality of entrepreneurs (dated March 2021) https://www.startup-book.com/2021/03/19/knowledge-skills-and-personality-of-entrepreneurs/ where it is claimed “There’s an entrepreneurial character.”
– The Founder’s Dilemmas – The Answer is “It depends!” (dated December 2013) https://www.startup-book.com/2013/12/12/the-founders-dilemmas-the-answer-is-it-depends/ where the claim is “There are no real pattern in becoming a founder (age, experience, childhood influences, personality, family status, economic status), however early influences and natural motivations seem to be important.”
– Larry Page and Peter Thiel – 2 (different?) Icons of Silicon Valley (date October 2021) https://www.startup-book.com/2021/10/30/larry-page-and-peter-thiel-2 -différentes-icônes-de-la-silicon-valley/
and I would advise anyone interested in the topic to read the book Founders at Work. I put my long notes about this great book at the end of this post.

This new article is long and a little complex. So I just took notes directly in the text and paste them here. But the article is worth reading if you have the time and interested.

Attention has increasingly considered internal factors relating to the firm’s founding team, including their previous experiences and failures, their centrality in a global network of other founders and investors as well as the team’s size. […] The effects of founders’ personalities on the success of new ventures are mainly unknown. […] Here we show that founder personality traits are a significant feature of a firm’s ultimate success.

[…]

Key personality facets that distinguish successful entrepreneurs include a preference for variety, novelty and starting new things (openness to adventure), like being the centre of attention (lower levels of modesty) and being exuberant (higher activity levels). However, we do not find one Founder-type personality; instead, six different personality types appear, with startups founded by a “Hipster, Hacker and Hustler” being twice as likely to succeed. Our results also demonstrate the benefits of larger, personality-diverse teams in startups.

[…]

In this article, we analyse a variety of firm-level, founder-level and founder-team-level determinants of the success of startups, which are by their very nature experimental, high risk and likely to fail.
Firstly, we examine a range of firm-level determinants of startup success, including location, industry and age of startup to explore to what extent these factors are associated with success. Then building on our previous occupation-personality fit research, we use a large collection of public data on startup companies from Crunchbase to examine the detailed personality profiles of founders.

[…]

Firm-Level Factors of Startup Success. On a country level, chances for success are highest in the US, Japan, West Europe, and Scandinavian countries. Firms from the payment and software industries have high chances of success. Chances of success are positively related to a firm’s maturity, with firms that are seven years or older having higher chances of success.

[…]

Does the combination of founders and their personalities play a role in startup success, and is there any evidence to support the commonly held view in the venture capital investment community that startups require three types of founders: a Hacker, a Hustler and a Hipster?

[…]

In technology, the categorical roles of Hackers (skillful computer programmers and developers) and Hustlers (entrepreneurial leaders able to win over customers and investors to new
products and ideas) have been around for decades, with […] oppositional tension. For example, when Steve Jobs announced he would take medical leave from Apple in January 2009, Mat “Wilto” Marquis described him as a hacker and a hustler in a well-wishing tweet. However, the first use of Hacker and Hustler in conjunction with Hipster in the context of the putative startup founder dream was coined by influential venture capitalist Elias Bizannes in 2011. It was then popularised in 2012 by an address at the influential technology conference South by Southwest by Rei Inamoto and in a subsequent Forbes article “The Dream Team: Hipster, Hacker, and Hustler”. Hipster is a broad term used to describe members of an urban subculture in many cities in the US and other countries who are design conscious and favour non-mainstream fashions, trendy foods and alternative music. Bizannes co-opted the term to reflect what he perceived was the increasing need for successful startups to have a founder with design-savvy, aesthetic imagination and insider knowledge (Hipster) in addition to the traditional roles of someone good at selling things (Hustler) and creating technology products (Hacker).

[…]

While recent research has demonstrated that many employees in the same occupations share similar personality traits, being a startup founder is not a conventional job. we inferred the personality traits across 30 dimensions (Big 5 facets) of a large global sample (n=4.4k) of successful startup founders.

[…]

Using two samples together: Successful Entrepreneurs and Successful Employees (unlikely to be founders), we trained and tested a machine learning random forest classifier to distinguish and classify entrepreneurs from employees and vice-versa using inferred personality vectors alone. As a result, we found we could correctly predict Entrepreneurs with 77% accuracy and Employees with 88% accuracy. Thus, based on personality information alone, we correctly predict all unseen new samples with 82.5% accuracy.

[…]

Adventurousness— the key feature

We explored in greater detail which personality features are the most important in distinguishing successful entrepreneurs from successful employees and found that the subdomain or facet of
Adventurousness within the Big 5 Domain of Openness was both significant and had the largest effect size. The facet of Modesty within the Big 5 Domain of Agreeableness and Activity Level within the Big 5 Domain of Extraversion was the subsequent most considerable effect. All thirty dimensions of the Big 5 facet were found to be significantly different in their distribution, with ten features having large effect sizes. […] Adventurousness in the Big 5 framework is defined as the preference for variety, novelty and starting new things

[…]

Six types of startup founders

Once we understood that startup founders have distinctive personality features that are different from regular employees, we explored whether there are distinct types of personalities among startup founders.

[…]

We discovered clear clustering tendencies in the data. Then, once we established the founder data clusters, we used agglomerative hierarchical clustering; a “bottom-up” clustering technique that initially treats each observation as an individual cluster and then merges them to create a hierarchy of possible cluster schemes with differing numbers of groups. And lastly, we identified the optimum number of clusters based on the outcome of four different clustering performance measurements. We found that the optimum number of clusters of startup founders based on their personality features is six (labelled #0 through to #5).

[…]

Together, these six different types of startup founders represent a framework we call the FOALED model of founder types—an acronym of Fighters, Operators, Accomplishers, Leaders, Engineers and Developers. Each founder Personality-Type has its distinct facet footprint. Also, we observe a central core of correlated features that are high for all types of entrepreneurs, including intellect, adventurousness and activity level.

[…]

By analysis of the six types of startup founders in our FOALED model within the broader Occupation-Personality landscape, we identify three types to be characterised as types of Hackers (Fighters, Operators and Developers) and two as Hustlers (Accomplishers and Leaders). The remaining type is different in personality to both Hackers and Hustlers. It is more of a subject matter expert whose insider field knowledge and problem-solving design strengths can be seen as a type of Hipster (Engineer). When we subsequently explored the combinations of personality types among founders and their relationship to the probability of the firm’s success, adjusted for a range of other factors in a multi-factorial analysis, we found significantly increased chances of startup success for Hipster, Hacker and Hustler foundation teams.

[…]

Our modelling shows firms with multiple founders are more likely to succeed, as illustrated in Fig. 3a), which shows firms with three or more founders are more than twice as likely to succeed as solo-founded. The benefits of larger and more personality-diverse foundation teams can be seen in the apparent differences between successful and unsuccessful firms based on their combined Big 5 personality team footprints, illustrated in Figure 3b). Here maximum values within each startup for each Big 5 trait for any of its cofounders are mapped, and the spread of these between sucessful firms — those who have IPOed, been acquired or acquired another firm and the other firms are shown. […] We found that ten combinations of founders with different personality types were significantly correlated with greater chances of startup success when accounting for other variables in the model. The coefficient of each of these factors is illustrated concerning other features that were also found to be significantly associated with success in Figure 3c.

[…]

We have learnt through this research that there is not one type of ideal “entrepreneurial” personality but six different types. Many successful startups have multiple co-founders with a combination of these different personality types. Startups are, to a large extent, a team sport; as such, diversity and complementarity of personalities matter in the foundation team. It has an outsized impact on the company’s likelihood of success. While all startups are high risk, the risk becomes lower with more founders, particularly if they have distinct personality traits. Our work demonstrates the benefits of diversity among the founding team of startups. Greater awareness of these benefits may help create more resilient startups capable of more significant innovation and impact.

More figures

Is there anything to conclude? Are the authors right or wrong? Can this be used for prediction? I do not know. The authors admit themselves there are biases in their research (it is based on the Twitter accounts of the founders…). I missed the element of the relationships between founders and I am a little skeptikal that more founders is better beginning with 3 or 4. My experience is that a team of 2 founders is ideal (you could chekc my long series of studies on startup data here. But who am I say this today ? What is certain is that the article is interesting and its ambtion to be praised !

Founders at Work - May08

A Library of Books about Startups, High-Tech, Innovation

I began this blog in July 2007, so more than 15 years ago. I began my professional activity around startups in September 1997, so more than 25 years ago. So many adventures, so many great moments. And so much book reading! I revisited these pages and did an exhaustive list of the books I could remember reading. Most have a post somewhere in the blog.

I created a little artificially 6 categories:
– About Google and Apple
– Entrepreneurs’ Biographies
– Startup Stories and Analyses
– Ecosystems and Innovation
– Venture Capital
– How to
– Fictions / Thrillers (or close)

Here they are… Enjoy (maybe!)

About Google and Apple

  • Goomics, Google’s corporate culture revealed through internal comics, Manu Cornet
  • In the Plex, How Google Thinks, Works and Shapes Our Lives, Stephen Levy
  • How Google Works, Eric Schmidt, Jonathan Rosenberg
  • Dogfight, How Apple and Google Went to War and Started a Revolution, Fred Vogelstein
  • I’M Feeling Lucky, Falling On My Feet in Silicon Valley, Douglas Edwards
  • The Apple Revolution, Steve Jobs, the Counter Culture and How the Crazy Ones Took Over the World, Luke Dormehl
  • Work Rules! Insights from inside Google that will transform how you live and lead, Laszlo Bock
  • The Google Story, David Vise
  • Return to the Little Kingdom, How Apple and Steve Jobs Changed the World, Michael Moritz

Biographies

  • Elon Musk, Tesla, SpaceX, and the Quest for A Fantastic Future, Ashlee Vance
  • Steve Jobs, La vie d’un génie, Walter Isaacson
  • Inside Steve’s Brain, Leander Kahney
  • The Man Behind the Microchip, Robert Noyce and the Invention of Silicon Valley, Leslie Berlin

Startups Stories / Analyses

  • Trillion Dollar Coach, The Leadership Playbook of Silicon Valley’s Bill Campbell, Eric Schmidt, Jonathan Rosenberg, and Alan Eagle
  • L’entrepreneuriat en action, Ou comment de jeunes ingénieurs créent des entreprises innovantes, Philippe Mustar
  • Chercheurs et entrepreneurs : c’est possible ! Belles histoires du numérique à la française, Laurent Kott, Antoine Petit
  • Bad Blood, Secrets and Lies in a Silicon Valley Startup, John Carreyrou
  • Bienvenue dans le Nouveau Monde, Comment j’ai survécu à la coolitude des startups, Mathilde Ramadier
  • Les start-up expliquées à ma fille, L’entrepreneuriat vu de l’intérieur, Guillene Ribière
  • Startup, Arrêtons la mascarade, Contribuer vraiment à l’économie de demain, Nicolas Menet, Benjamin Zimmer
  • No Exit, Struggling to Survive a Modern Gold Rush, Gideon Lewis-Kraus
  • The Hard Thing About Hard Things, Building a Business When There are no Easy Answers, Ben Horowitz
  • Zero to One, Notes on Startups, or How to Build the Future, Peter Thiel, Blake Masters
  • Startupland, How Three Guys Risked Everything to Turn an Idea into a Global Business, Mikkel Svane, Carlye Adler
  • European Founders at Work, Pedro Gairifo Santos
  • Founders at Work, Stories of Startups’ Early Days, Jessica Livingston
  • The Monk and the Riddle, The Education of a Silicon Valley Entrepreneur, Randy Komisar
  • Once you’re lucky, Twice you’re good, The Rebirth of Silicon Valley and the Rise of Web, Sarah Lacy
  • They Made It! Angelika Blendstrup
  • Betting It All, The Entrepreneurs of Technology, Michael Malone,
  • In the Company of Giants, Candid Conversations With the Visionaries of the Digital World, Rama Dev Jager, Rafael Ortiz
  • Startup, A Silicon Valley Adventure, Jerry Kaplan

Ecosystems and Innovation

  • From the Basement to the Dome, How MIT’s Unique Culture Created a Thriving Entrepreneurial Community, Jean-Jacques Degroof
  • The Microchip Revolution: A brief history, Luc O. Bauer, E. Marshall Wilder
  • The Code, Silicon Valley and the Remaking of America, Margaret O’Mara
  • Loonshots or how to nurture crazy ideas, Safi Bahcall
  • Troublemakers, How Generation of Silicon Valley Upstarts Invented the Future, Leslie Berlin
  • The Rainforest, The Secret to Building the Next Silicon Valley, Victor W. Hwang, Greg Horowitt
  • The Innovators, How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution, Walter Isaacson
  • The Entrepreneurial State, Debunking Public vs. Private Sector Myths, Mariana Mazzucato
  • Genentech, The Beginnings of Biotech, Sally Smith Hughes
  • Science Lessons, What the Business of Biotech Taught Me About Management, Gordon Binder
  • Le prochain Google sera Suisse (à 10 conditions), Fathi Derder
  • Prophet of Innovation, Joseph Schumpeter and Creative Destruction, Thomas McCraw
  • Start-up Nation, The Story of Israel’s Economic Miracle, Dan Senor, Saul Singer
  • Boulevard of Broken Dreams, Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed–and What to Do About It, Josh Lerner
  • The Innovation Illusion, How So Little is Created by So Many Working So Hard, Fredrik Erixon, Bjorn Weige
  • Un paléoanthropologue dans l’entreprise, S’adapter et innover pour survivre, Pascal Picq
  • Against Intellectual Monopoly, Michele Boldrin and David K. Levine
  • The New Argonauts, Regional Advantage in a Global Economy, AnnaLee Saxenian
  • Regional Advantage, Culture and Competition in Silicon Valley and Route 128, AnnaLee Saxenian
  • Silicon Valley Fever, Growth of High Technology Culture, Everett M. Rogers, Judith K. Larsen
  • Creating the Cold War University, The Transformation of Stanford, Rebecca S. Lowen
  • Nurturing Science-based Ventures, An International Case Perspective, Ralf Seifert, Benoït Leleux, Christopher Tucci
  • Entrepreneurship and Innovation, Peter F. Drucker
  • The Gorilla Game, Picking Winners in High Technology, Geoffrey Moore
  • Inside the Tornado, Strategies for Developing, Leveraging, and Surviving Hypergrowth Markets, Geoffrey Moore
  • Crossing the Chasm, Marketing and Selling High-Tech Products to Mainstream Customers, Geoffrey Moore
  • The Founder’s Dilemmas, Anticipating and Avoiding the Pitfalls That Can Sink a Startup, Noam Wasserman
  • The Innovators Dilemma, When New Technologies Cause Good Firms To Fail, Clayton M. Christensen
  • Accidental Empires, How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can’t Get a Date, Robert X. Cringley

Venture Capital

  • The Power Law, Venture Capital and the Making of the New Future, Sebastian Mallaby
  • The Masters of Private Equity and Venture Capital, Management Lessons from the Pioneers of Private Investing, Robert A. Finkel
  • The Startup Game, Inside the Partnership between Venture Capitalists and Entrepreneurs, William H. Draper III
  • Creative Capital, Georges Doriot and the Birth of Venture Capital, Spencer Ante
  • The Business of Venture Capital, Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies, Mahendra Ramsinghani
  • The New Venturers, Inside the High-Stakes World of Venture Capital, John Wilson

 

How To

  • The Mom Test, How to talk to customers & learn if your business is a good idea when everyone is lying to you, Rob Fitzpatrick
  • Straight Talk for Startups, 100 Insider Rules for Beating the Odds, Randy Komisar, Jantoon Reigersman
  • Measure What Matters, OKRs, The Simple Idea that Drives 10x Growth, John Doerr,
  • The start-up of You, Adapt to the Future, Invest in Yourself, and Transform Your Career, Reid Hoffman
  • Don’t f**k it up, How Founders and Their Successors Can Avoid the Clichés That Inhibit Growth, Les Trachtman
  • How To Start a Business That Doesn’t Suck (and will actually turn a profit), Michael Clarke
  • The Four Steps to the Epiphany, Successful Strategies for Products That Win, Steve Blank (NB: the book has been updated and renamed as The Startup Owner’s Manual, The Step-by-Step Guide for Building a Great Company, Steve Blank, Bob Dorf)
  • The Lean Startup, How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses, Eric Ries
  • Business Model Generation, Alexander Osterwalder and Yves Pigneur
  • Slicing Pie, Funding Your Company Without Funds, Mike Moyer
  • Getting to Plan B, Breaking Through to a Better Business Model, John Mullins, Randy Komisar
  • Winning Opportunities, Proven Tools for Converting Your Projects into Success (without a Business Plan), Raphael Cohen
  • Start-up, (anti-)bible à l’usage des fous et des futurs entrepreneurs, Bruno Martinaud
  • The Art of the Start, GuyKawasaki

 

Fiction / Thrillers or close

  • Drop by Drop, Keith Raffel
  • Smasher, a Silicon Valley Mystery, Keith Raffel
  • dead, a Silicon Valley Mystery, Keith Raffel
  • The Ultimate Cure, Peter Harboe-Schmidt
  • The First $20 Million Is Always The Hardest, Po Bronson
  • The Nudist on the Late Shift, And Other True Tales of Silicon Valley, Po Bronson

A MIT entrepreneurial history – Epilogue : The Impact and some lessons learnt

Degroof has produced one of the best books describing entrepreneurial ecosystems as I have already mentioned in 2 previous posts including Part 2 : Ecosystems & Culture.
In the last part of his book, he switches to the impact of MIT and its ecosystem.

This is a well-known topic as you could read in Entrepreneurial Impact: The Role of MIT. Degroof reminds us (pages 183-89) of the biotech startups around Kendall Square (Biogen, Genzyme) as well as the R&D of big pharma relocating around, such as Swiss Novartis. It’s not only about biotech as Lotus Development or Akamai exemplify. He also mentions some alumni who became famous entrepreneurs or investors, Hewlett (36), Perkins (53) or Swanson (69). He does not mention Noyce (53) though, and his tinkerings (more here and there) or Haren (80) for French people. There could be hundreds of others!

He also adds about the impact of local accelerators from CIC in the late 90s to MassChallenge and TechStars. I am a little less convinced about the international impact MIT had in a more topdown institutional way. What is the exact outcome of partnerships in Singapore, Hong Kong, Abu Dhabi, Spain or Portugal. The Deshpande Center certainly inspired many initiatives including the Innogrants I managed at EPFL in the mid 2000s or even what I do today.

Degroof also develops the importance of teaching and training: “In trying to reconcile the tension between rigor and relevance, Aulet argues convincingly that entrepreneurship should be framed as a craft as opposed to a science or an art. Like a craft, it is built on fundamental concepts. A potter, for instance, needs to master the basic mechanical and chemical principles of his craft. Knowing those does not guarantee success, but they considerably improve the chances. Like a craft, entrepreneurship is best learned through apprenticeship, or learning by doing, rather than relying only on lectures or manuals.” [Page 212]

Again I am a little less convinced about this generally-mentioned point: “There is a strong belief at MIT that entrepreneurship is a team sport. It is based on the evidence that teams of founders tend to perform better than individual founders, and that complementary teams tend to do better than homogeneous teams. Following on the heels of the I-Teams class, nowadays, most teams in entrepreneurship-related courses or contests are required to be composed of a mix of engineering or science students with management students. This has become an important feature and a great strength of entrepreneurship training at MIT. Both groups benefit from each other’s contributions. Engineering and science students discover the market dimensions of the projects with the help of their peers from the business school and learn that it is not enough to build a better mousetrap, while the latter benefit from scientific and engineering insights. Both groups are forced to deal with cultural differences and with more complex team dynamics than what occurs in homogeneous teams. The results are stronger teams and more effective projects.” [Page 214]

Entrepreneurship is a complex venture and entrepreneurial ecosystems are complex and fragile settings. Degroof convincingly describes why Boston has become a model. He does not really develop why it has not been as succesful as Silicon Valley, with a similar culture though. Paul Graham’s Ycombinator had moved from Boston to Silicon Valley as mentioned in Why Boston Should Worry. When I visited Novartis people in Boston, some claimed that Silicon Valley was to Boston what Boston was to Europe. Yes, Boston was more innovative than Europe and that is why Novartis moved some R&D to the West, but when Novartis bought Chiron in Silicon Valley, Novartis discovered going further West was again more adventurous. (See Myths and Realities of Innovation in Switzerland).

But these debates are secondary to the lessons learnt and synthesized by Degroof. A lot of inspiration is to be found. And coming back to the great foreword by Metcalfe : recreating MIT’s renowned entrepreneurial ecosystem is not a simple task. There is no copying MIT’s ecosystem and pasting it into another institution. The founding principles and unique cultural elements that came together to create the “secret sauce,” as Jean-Jacques calls it, the ground-up nature of what has grown and thrived at MIT, are not easy to duplicate. That does not mean that there are no concrete lessons to be learned, that there is not knowledge that can be translated and adapted for other universities and economies. Today, as a successful and seasoned entrepreneur, I still frequently look to MIT in my efforts to build a thriving entrepreneurial ecosystem at the University of Texas. I don’t hesitate to reach out to my extensive network at MIT for answers to questions of theory and practice. From there, I have been able to make great strides in my goal. I may not be recreating MIT, but I am modeling what I do after the very best and adapting it to the specifics I have here in Austin.”

A MIT entrepreneurial history – Part 2 : Ecosystems & Culture

I continued reading the excellent From the Basement to the Dome by Jean-Jacques Degroof and found more inspiring elements about ecosystems, culture and also technology transfer from academic institutions after my first post. Here they are:

6 ingredients of the MIT ecosystem

Degroof gives us the cultural elements of the ecosystem: But what is it about this culture that has been supportive of entrepreneurship? The argument of this book is that entrepreneurship is particularly congruent with at least six elements of MIT’s culture: a well-ingrained, bottom-up organizational dynamic; excellence in all things that one studies or attempts to do, as well as a belief in hard work and fortitude; an interest in problem-solving and having a positive impact on the world; a belief in experimenting and a tolerance of failure; the pride of being viewed as rebels, sometimes eccentric and even a bit geeky, pursuing unconventional solutions; and the tradition of a multidisciplinary approach to problem-solving. [Page 90]

Why startups?

Here is an interesting comment about academic technology transfer: “Established firms are seldom interested in licensing emerging technologies from academia for several reasons. They don’t understand the potential of the technology; the time frame to develop the tech into a viable product exceeds the time horizon that most firms are comfortable with, or else they fear that they could cannibalize their existing business. As a result, in 1987, the TLO’s new director, John Preston, took the initiative to license technology to new ventures in exchange for equity, first as an experiment because there was a great concern at MIT about potential conflicts of interest. During the first year of this policy, six companies were formed based on such licenses, including ImmuLogic and American Superconductor. Sixteen more companies were formed during the second year. [Page 34]

Degroof then describes the multitude of ecosystem tools, all in a bottom-up logic, with serendipity (chapter 6) as a fairly common mechanism. The beginning of chapter 8 on technology transfer with the example of Amberwave is another must-read:

Often the initial performance of the new technology is either lower than that of existing solutions or not high enough to justify the switching cost for potential clients. As a result, established companies often don’t see the potential of new academic technologies. Moreover, in the few cases when the technology’s advantage is obvious or clearly promising, established companies are often concerned lest they cannibalize market share from their existing technology—a technology in which they have invested time and money, and around which they have built whole supply chains and other infrastructure.
It is estimated that an investment equal to 10 to 100 times the cost of the academic research is needed to bring an academic technology to market. This process also requires patience and perseverance. It can take at least two to three years for a patent to get issued once it is filed. When a company finally licenses a technology, it might take an additional five to ten years before it generates revenue. All in all, the uncertain performance of developing academic inventions, the associated costs, and the time lag between invention and revenue generation make investing in embryonic academic inventions extremely unattractive.
This does not mean that large firms never license patents from universities, but more often, inventors are the only ones to understand and to believe in the commercial potential of their technology. They are, therefore, frequently the only candidates interested in founding (and sometimes funding) a company to commercialize their technology. This process involves obtaining a license for the patent or patents based on their invention from their university, since, following the Bayh-Dole Act of 1980, the university owns the intellectual property of government-funded research. The edge that inventors have is the extensive and unique knowledge that they have accumulated through their research efforts and exposure to industry over the years.
[Page 156]

Managing technology transfer

And more interesting information here about avoiding conflicts of interests at MIT: Policies do not allow faculty members to use students for research and development (R&D) related to a start-up in which that professor has equity, nor may students be employed by such a start-up. A start-up in which a professor has an interest is not allowed to fund research in that professor’s lab. Similarly, a professor is not allowed to conduct federally funded research in collaboration with such a start-up, with the exception of SBIR and Small Business Technology Transfer (STTR) funding. A start-up venture may not be located in a lab. Employees of a professor’s start-up may not be involved in the research activities of the professor’s lab. Research in the lab may not be influenced by a professor’s other professional activities. A faculty member’s full-time employment at MIT prohibits significant managerial responsibilities in a start-up. [Pages 161-62]

Or about making money with Technology Transfer: Many universities expect their technology transfer activities to be profitable and bring in revenue. Although MIT is one of the most successful and experienced universities in terms of technology transfer, its experience shows that this kind of financial gain is a misleading expectation. “Any university that counts on its tech transfer to make a significant change in its finances is statistically going to be in trouble,” said Nelsen. To that end, her motto during her tenure as head of the TLO was, “Impact, not income.” [Page 162]

Many startup stories

Degroof adds anecdotic descriptions of individual companies, rich with lessons: these are BBN (1948), Teradyne (1960), Analog Devices (1965), Prime Computer (1972), Apollo Computer (1980), Thinking Machines (1983), Harmonix Music Systems (1995), Amberwave (1998) ThingMagic (2000), Momenta Pharmaceuticals (2001), SmartCells (2003), Ambri (2010), Firefly Bioworks (2010), Sanergy (2011), Wecyclers (2012), Nima Sensor (2013), Bounce Imaging (2013), ReviveMed (2016), Biobot Analytics (2017), not forgetting Robert Langer’s 40+ spinoffs from 1987 to today!

Internal venture capital – The Engine

My experience with academic venture capital funds is mitigated to say the least. So this is an interesting experiment: Faced with this perceived market failure, MIT’s leadership pointed to the need for patient capital to bring ventures that are trying to commercialize tough science and need more time than do digital businesses to reach a stage where they are ready for venture capital. […] In October 2016, President Reif announced the creation of The Engine, https://www.engine.xyz , a for-profit but public benefit corporation, separate from MIT, that would act as an accelerator for start-ups trying to commercialize “tough techs” by providing advice and physical facilities, as well as an investment fund of patient capital. […] In addition to going against MIT’s policy of not funding entrepreneurial projects, The Engine also broke with Institute tradition by incubating the entrepreneurial projects of its members, which certainly raised substantial objections within the MIT community. [Page 64]

The Engine has a double bottom line: it seeks financial returns and it seeks impact. The Engine raised $200 million for its first fund, with MIT contributing $25 million. […] The fund invests from $250,000 to $2 million per venture, and its investments are not exclusive to MIT-related firms. The investment is made with a time horizon of eighteen years, rather than the typical five to eight years given in the case of venture capital funds. […] Second, The Engine gives start-ups access to infrastructure, such as expensive, specialized equipment, including some from MIT, that otherwise might represent a barrier to entry to firm foundations. The Engine’s facility was initially located in 26,000 square feet of space in Cambridge, with the ambition of expanding to 200,000 square feet through a network of offices, labs, and prototyping and makerspaces a few blocks from Kendall Square. […] Third, the new initiative comes with a network of professionals and mentors in the so-called hard-tech space. [Page 173]

In 2020, The Engine raised a second $250M with $35M from MIT and Harvard University joined as a new LP. Is this different than VC? Will it succeed? Time will tell…

A MIT entrepreneurial history by Jean-Jacques Degroof

With an impressive foreword by Bob Metcalfe (the inventor of Ethernet et cofounder of 3Com) who rightly renames MIT a “Innoversity”, Degroof explains in From the Basement to the Dome that entrepreneurship is engrained in the MIT history and culture, not so much from a political decision but from serendipitous events.

Its motto (Mens et Manus, “Mind and Hand” in Latin), its logo, the right given to professors to spend 20% of their time in consulting since the 20s and the creation of the patent committee in 1932 are all indications that practice is as important as theory in engineering science. The importance of military funding through the creation of OSRD was also critical to the richness of MIT’s inventions.

The culture is exemplified by Ray Stata, a cofounder of Analog Devices : “It’s like ‘monkey see, monkey do.’ If you see others start companies and become successful, you say, ‘If they can do it, so can I.’ Whereas if you don’t see that up close and personal, there’s a fear and a mystery about how to do it. The entrepreneurial spirit at MIT gives you confidence.” [Page 17] And what about his experience in business: “I don’t have a clue about how to be a president, but I’m going to take the next twelve months to learn. And if at the end of that twelve months you guys collectively decide, or if the board decides, that I’m not the person who can provide leadership, I’ll step down. But in the meantime, while I’m learning, you’ve got to help me.” Fortunately, Stata’s direct approach worked. “Everybody dug in, and there was then no way I could fail. Over the next twelve months I learned how to be a president, and that process has continued for four decades.” [Page 18]

If you didn’t know Ray Stata, you might have known the building on MIT’s campus with his name.

I wondereed before beginning the reading if Degroof would mention the debate about why Boston did not end being as successful as Silicon Valley. And he does! Early in his book, on pages 24-25. This is a must-read and I am not finished yet. Degroof quotes famous Regional Advantage by AnnaLee Saxenian. I will let you discover.

This table that I had copied a long time ago is another illustration of the differences, not so much between Stanford/Berkeley and MIT/Harvard but about the number of firms spun-off from established firms. Just compare what happened at IBM on the west and east coasts. (PS: I had not initially mention the source of the table, it is part of High-Tech Startups and Industry Dynamics in Silicon Valley, Public Policy Institute of California, Junfu Zhang (2003) San Francisco, California.)

Let me finish this 1st part with another quote by Lita Nelsen, former head to MIT’s Technology Licensing Office: “People say to me, ‘Does MIT have an incubator?’ And my classic answer has been, ‘Yes, it’s called the city of Cambridge.’” [Page 26] This reminds me a quote of Richard Newton, a former professor at Berkeley. He had written stating a colleague of his: “The Bay Area is the Corporation. […When people change jobs here in the Bay Area], they’re actually just moving among the various divisions of the Bay Area Corporation.” This is a critical explanation of ecosystems, they are not so much about institutions but about the fluidity of exchanges between individuals.

Philippe Mustar – Entrepreneurship in Action – final episode

Here is my last article on the excellent Entrepreneurship in action of which you will find the 5 previous articles with the tag #entrepreneurship-in-action. Here are some final notes:

The ingredients of success

But, those who fund this project are not doing it just for the skills and experience of the three entrepreneurs. They show other qualities that convince to follow them: their passion, their motivation, their ambition. Investors know that these qualities will allow the team to stay focused and better deal with the many uncertainties that lie ahead. To a student who asked a venture capitalist what are the three most important qualities that a project must have to be financed; he replied: the first is the team, the second is the team, the third is the team. Another joke, common in this industry, says that investors prefer to finance a good team with a bad project rather than the other way round (because a good idea carried by a team whose skills do not match those necessary to developing it is unlikely to go far; while a good team will always be able to modify, transform or change an initial idea of ​​low quality). The rest of the story shows that these statements, usually made in the tone of a joke, apply particularly well to Criteo and that those who make them, the venture capitalists, will have to believe in them and hold onto them firmly for several years. [Page 220]

Some criteria explaining success (according to one of the co-founders of Criteo):
– Have been able to focus on a single product
– Aim for excellence in all areas of the company
– Find the right cursor between managing daily problems and anticipating the future
– The ability to make difficult decisions
– Trust in technology

And finally Mustar returns to this process of innovation which looks like anything but a mechanical process:
– A long and winding process, made of many transformations
– An emerging process
– An experimental process
– A process filled with uncertainties, choices to be made, decisions to be made
– A collective process and a distributed action
– A social process

What is an entrepreneur? Are you born an entrepreneur or do you become one?

Mustar addresses in his conclusion a topic as old as startups with all the humility and caution, because it seems like we don’t really know (even if many claim they do know). Apart from the tautological definition, the entrepreneur is the one who creates (and builds) a business, it seems very difficult to find common traits and qualities specifically for entrepreneurs. Still, I am less confortable with his reminder of Peter Drucker’s claim. “Most of what you hear about entrepreneurship is all wrong. It’s not magic; it’s not mysterious; and it has nothing to do with genes. It’s a discipline and, like any discipline, it can be learned.” [Page 287]

I’m a little more comfortable with Komisar’s point of view in How Do You Teach High-Tech Entrepreneurship according to Randy Komisar.

There is no such thing as a monolithic entrepreneurial condition. Even among the very small number of first-time entrepreneurs I interviewed, there is a very diverse range of relationships with entrepreneurship. What characterizes them, beyond the great diversity of their profiles, their temperament, their way of behaving, is more a desire to do, to learn, to succeed, a great capacity for work, listening to others, ambition… but this is by no means specific to entrepreneurs. We find these same desires or aptitudes among employees, executives of large companies, philanthropic activities, athletes, artists, etc. [Page 289]

This journey with these young engineers allowed me to get rid of a conception of entrepreneurship that separates on the one hand an entrepreneur or a team, and on the other an activity of creating a new product and a company. The entrepreneur and the company are built together, in the same movement. [Page 290]

Philippe Mustar – Entrepreneurship in Action – episode 5

This new episode of Philippe Mustar’s book relates to the history of Criteo, a startup already mentioned on this blog here and there.

For once, I disagree slightly with a quote from the book (which is not from the author): “The profile of the team formed by the three creators of Criteo is a perfect example of the one described theoretically by Kathleen M. Eisenhardt (Professor of Management at Stanford University and Co-Director of the Stanford Technology Ventures Program) as “the best it can be.” Kathleen Eisenhardt, based on a lot of research on the subject, defines (somewhat mechanically she herself admits) what a great team is:
– it initially consists of three, four or five people. If there are only two, it is not enough because there are so many things to do in a start-up and above all, being two does not offer a wide enough diversity of opinions, of points of view. If there are six, seven or eight, it is no longer a team, it is a group whose management and coordination take too much time.
– it is multidisciplinary and transversal, that is to say it combines skills in engineering, marketing, finance. But, these skills must be real, that is to say not based only on a diploma, but on actual experience.
– it includes people who have already worked together, this is an important asset because the creation of a start-up is made up of stressful situations, which are easier to share with people you know.
– finally, and this is more surprising, the “best teams” are those which have people of various ages, not only young people in their twenties but also others who have more experience. This often allows you to see different aspects of the same problem.
For Kathleen Eisenhardt, teams that meet these criteria are the ones that perform best. ”
[Page 199]

As much as I can agree if we talk about the management team, I believe that at the time of creation, the founders have different pedigrees. As I wrote in my own book in 2008, “A start-up is a baby created by its parents – the founders. They are responsible for its development and to help it adapt to an evolving world. It does not mean that a founder has to give up control of his start-up. Would a parent give up his child just because he has no experience in feeding and educating? Is the analogy of little value? There is also a responsibility in succeeding in the development. Experts will be used, medical doctors, teachers for the child, professionals, and consultants for the start-up. The Google founders kept such “ownership” during the company’s growth. Eric Schmidt has become CEO but he is more a partner of the two founders. Start-ups seldom develop that well and investors sometimes have to make tough decisions when they take away the “parent” power from the founders. Investors do not like to do this in general and only do it when they consider it absolutely necessary. This is an ideal world but everyone knows reality is more complex”. And I could add, two parents is probably the ideal model.

On the other hand, I fully agree with the sources of innovation: The sociology of innovation has shown that the sources of innovation, like those of the Nile, are multiple and sometimes difficult to identify. It also pointed out that ideas for new products or services are the most common things in the world, and even that they are always bad, always poorly framed and approximate at the origin. As Bruno Latour says: “All important discoveries are born ineffective: they are hopeful monsters,“ promising monsters ”. [Page 251] and the French text by Latour http://www.bruno-latour.fr/sites/default/files/P-92-PROTEE.pdf . [A short parenthesis about Hopeful Monsters, a term I knew only from one of my favorite novels, and I blogged about it here.]

Philippe Mustar – Entrepreneurship in Action – episode 4

Following two previous articles here and there and there again about this very interesting book, here are a few more lessons.

About selling a product

Expliseat is as rich as DNAScript in lessons especially about the description of how 3 young people with no experience in the field will find and bring together the skills to design, produce and sell. We also see one of the founders leaving the ship without the adventure stopping and finally page 186: During these years, Benjamin also learned that the only economic argument (“we make you earn money”), and more broadly those which are purely rational, are not sufficient to convince the customer:

“If you come up with a purely rational product, it’s not a good product, because the buying process isn’t one hundred percent rational. It was important for us to understand this. With the […] then the […], we said: “this is the best […] on the market”, but for the customer, the best […] is also a [product] which is beautiful, which one desires, which inspires confidence … It requires commercial work on the product to make it attractive. The end goal is that people no longer just buy a [product], they buy [our product], something that is beyond the product, they buy a brand, an industrial experience, a purchasing experience, a customer experience, an after-sales service… This is typically what you do when you buy an iPhone, you don’t buy a phone, you buy an Apple, you buy an experience, well it’s the same thing in industry and B2B ”. [Pages 194-5]

The “process of innovation”

What surprises about this story is the apparent mix of genres: the [product] is not yet certified, nor realized and entrepreneurs are already selling it. We are witnessing a real whirlwind in which the team experiments, manufactures, sells, tests, collaborates with various actors, negotiates certification, modifies the project, transforms the [product], changes alliances, partners and market, goes back, takes a detour to a research laboratory abroad, develops a new prototype… We are far from the classic model of innovation, a linear model where distinct stages follow one another: research, then experimental development, prototyping, industrialization and, last step, commercialization. In such a process, the customer or user is passive, she or he enters at the end and the only room for maneuver is to accept or refuse the innovation.

This linear process is a kind of relay race where the end of one stage marks the start of the next stage; and, within the company, each of these steps is the result of a different department: research department, design office, production department, then marketing and commercialization … This sequential vision has been widely criticized by literature, whether it is evolutionary economic theories, the sociology of innovation or the management of technology.

About the market

Expliseat seems to be coming at the right time in their [market]. Often companies with their innovation arrive too late or too early in the market they are targeting. The Greek word kairos [1] qualifies this moment, it is the time of the right moment, the instant of the opportunity. [Pages 195]

[1] The Greek god Kairos is the winged god of opportunity, to be seized when it passes. He is represented by a young man who has only a tuft of hair on his head. As he passes nearby, either you don’t see him, or you see him and do nothing, or you reach out and grab his hair, thus seizing the possibility, the opportunity.

I’ll let you explore the author’s use of the Scrabble metaphor to show you that there is no real innovation process out there, nor opportunity there, but permanent construction from next to nothing.

About decision making under uncertainty

The founders’ ability to act is found in particular in the multiple choices they are faced with, and in the variety of options available to them. For what type of aircraft can this ultralight seat be produced? What form should this take? What materials to use? Which shareholders to bring into the capital? Where to install the company? Should we do it or have it done/outsourced? Which subcontractor to work with? Which research laboratory should be mobilized to solve a specific problem? Which engineer to recruit? What modifications should be made to the structure of the seat? With which industrial partner to enter into an alliance? Which business strategy to choose? Which business model to adopt? At what price to sell the seat? How to organize the business? Etc.

Along with the diversity of actors that we have highlighted, the process I am studying is also populated with a multitude of choices. These are many options that entrepreneurs explore. Here too, they are as much technical as they are economic, organizational or social. The story of Expliseat is the story of an expedition, its actors engage in unknown territory: which options to choose, which to close, which to open or re-open? “To govern is to choose”, says the maxim of the Duke of Lévis. Many options explored in this story lead to dead ends, others that will be exploited lead to failures, and finally others lead to success – and one could say, after the fact, but only after the fact, that “it was the right choice”. [Pages 203-4]

Philippe Mustar – Entrepreneurship in Action – episode 3

Here is episode 3 of my reading Entrepreneurship in Action by Mustar after episode 1 and episode 2.

I would like to mention what I consider an amazing coincidence in comparing two pages of Mustar’s book and the Google following short video.


There Larry page gives tips including:
Tip 2: There is a benefit from being real experts. Experience pays off.
Tip 3: Have a healthy disregard for the impossible. Stretch your goals.

About tip 2: “We worked on Google for many years at Stanford before we started the company. And that was a pretty nice position to be and we understood sort of all aspects in search. We talked about the search companies for many years. We really knew a lot about what’s going on. They can do that pretty cheaply, right? It’s just your labor, right? You can invest a year or two or three years and really learn something very, very well before you start having hundreds of people working on the problem.”

About tip 3: “I went to a leadership seminar once in Michigan where I came from and they have this great slogan which is, “Have a Healthy Disregard for the Impossible.” What this means is that, you really stretch goals that you’re not sure you can achieve but are sort of reasonable. You don’t want completely outlandish goals either. In fact one thing that I didn’t quite realize when I was starting Google is that it’s often easier to have aggressive goals. Now what that means is, a lot of time people take very specific things they want to do because they think they’ll be easier to attain. What happens if you’re being more specific, smaller markets and that kind of thing, you also get less resources.”

which I compare to pages 120-21:

About expertise: “To respond to these multiple questions, the trio meets many actors: “It was also important to speak very quickly to customers and experts in the field.” […] The team conducts a competitive watch to understand the positioning of the three major producers, but also the smallest that share the remaining 20% of the market. “I did all the fairs to understand how the sector works, how prices are fixed, what are the innovations in progress”. The objective for the trio is to differentiate its offer as much as possible from that of its future competitors.”

About the impossible: “During this period, as in the years that followed, many voices tell them that what they plan to do is not possible, that if we could […] the large companies that dominate the market would have already done it, that the development of industrial equipment is long and expensive and that they are subject to a tatillon certification process that the composite materials they hope to use will never pass. Last But Not Least, how young inexperienced and totally ignorant engineers of the sector could succeed in the giants of the sector, their tens of thousands of employees and their armies of experienced engineers.”

A final message from the founders of Expliseat which I find also very interesting: Unlike the entrepreneurship manuals which advise teams of founders to divide up the functions very early on, at Expliseat, during the first year of the project, the three entrepreneurs play all the roles at the same time. “Everyone does everything”. This is the formula they liked to repeat then.

Philippe Mustar – Entrepreneurship in Action – episode 2

Entrepreneurship in Action by Philippe Mustar is a really good book, as I had hinted in my previous post.

I just finished reading the analysis about DNA Script which I found very convincing. More than 70 pages describing an adventure which is built by moving forward often blindly, and with a lot of uncertainties. You learn by doing very often. Here is the concluding page which will hopefully make you want to read the full chapter.

Through discussions with them, the creators of DNA Script never gave the feeling or expressed the fact that they took any risks. Sylvain only sees risk as an opportunity cost for the entrepreneur: “the cost of time spent working on a project that may not work when we could have spent this time on another job or another project that would have worked better”. Thomas distinguishes between two types of risk. The first is linked to the psychological perception of failure, particularly by the entrepreneur’s entourage, which still exists in France but is declining. This type of risk was not very present for him. The second is the material risk.

“Normally, if you do things right, the material risk to each individual’s assets is well protected – even if sometimes entrepreneurs do stupid things. The material risk for people like us was having to find a job. That is all”.

Which wouldn’t have been difficult for the three engineers.

Becoming an entrepreneur, always according Thomas, is not so much taking risks as “getting out of your comfort zone”, and this in at least three areas: the need to learn, the responsibilities to be assumed and the amount of work to be done.

First of all, the first-time entrepreneur will have to learn a lot of things in a wide variety of fields. “You have to want to learn, to feel that your day is completed when you say to yourself that you have really learned things.”

Then, you must face strong responsibilities.

“In large companies, executives who hold important positions remain very protected by the organization; some have cost their companies huge amounts of money without real consequences. Conversely, Sylvain, Xavier and I, if the business goes badly, we are directly responsible for the job of the employees of the company, as well as for the money of our investors. Both have trusted us. This is a big responsibility. The company is a legal person, which has an interest that may be different from the interest of the manager or that of any of the employees. We are responsible for this legal person because today, without us, it cannot be autonomous. You have to constantly ask yourself: what is the best interest for the company?”

Finally, the entrepreneur must step out of his comfort zone, especially on the amount of work he has to accomplish. “There’s a monumental amount of work, all the time, at every moment, on very different things, it’s a huge mental load. They say success is 10% talent and 90% transpiration, that’s right.”