Where we are …

Ideating
Launching
Bootstrapping
Scaling
Enduring
 What we will cover …

• Assembling a founding team (and an executive team later)

• Modelling your business for bootstrapping
• Causal method
• E ectual method
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What are the differences between …

Adding people to an existing company

and

Adding founding team members?

Facts

• 14% of startups fail because of poor founding team “ t”

• Forming - Norming - Storming - Performing is a fact
• In 45% of startups, the founders are clones of each other
• Chemistry -> Physics -> Math vs Math

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Key challenges

• Hiring decisions
• Firing decisions
• Cultural and attitude t
• The important skill sets
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 Founding Team skill sets

• The Genius
• The operations superstar
• The leader
• The industry veteran
• The sales animal
• The nancial suit
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Two key questions

• Can we have a company without this person on the founding team?

• If we cannot, what will keep this person committed for the long term?
The 3 “R”s

• Relationships
• Roles
• Rewards
Case: Investic - Assembling a Founding Team
Bootstrapping
When you attempt to found and build a company from personal nances
(including friends or family) or the operating revenues of the new company.

Pros Cons
Equity retained, potentially valuable later Running on fumes

Full control over the company Less help from “external” stakeholders

Customer revenue ploughed back for growth Poor cash ows can kill you

Focus on growth, not on managing investors Potential to lose out to well funded competition
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Some domains are easier than others

• Consumer startups (and not business-to-business)

• Services startups
• “Trading” / “Aggregators”

• But there are exceptions to these rules (Zoho, HappyFox …. )

How to bootstrap .. the right way

• Disciplined, MVP based approach

• Rent, don’t “buy”: Pay as you Go models work
• Focus on customer revenues AND collection cycles
• Target pro ts, not customer acquisition alone
• Very lean team; perhaps only the founders
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Bootstrapping Case Study
Aviron Interactive
Questions for Aviron Interactive

• Which approach should Andy take?

• The traditional approach, or
• The lean and agile method that i3 used?
• Comment on his MVP thoughts (gami cation, chased by zombies etc)
• Comment on his business model: Build + Sell subscription
• Was Andy being over optimistic that he could do the entire thing within 6 months
and 250K$?

• Comment about his competition and his own strategy.

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Modelling a business
Modelling your business for success
The Causal method and the E ectual Method

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Fundamentally different approaches

Causal Method Entrepreneurial method

Begin with a goal Begin with what you already have (your “resources”)

Put together the “resources” that you will need Put together the potential goals you can gun for

Focus on nding the resources you need Experiment with the possible end goals

Business model canvas, Lean Canvas Principles of e ectuation

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Why is a model needed?

• Creating a “model” for your business is the same as creating a blueprint that
you “wish” to follow.

• It give you the ability to imagine your business at a high level

• It can give you the metrics and the actions that you think you will need to be
successful

• It can also be a great way to “box” in various components of your business

and understand their “connections”

• It can help you to quickly pivot in case of a needed change.

How?

• A business model canvas / lean model canvas

• The e ectuation model
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What is a business model canvas?
What is a Lean Canvas?
Differences?

Lean Canvas Business model canvas

Great for a quick-and-dirty look Meant for a harder look at an opportunity

Works well for early stage companies seeking product-

Works well when you are trying to scale
market t

Can help you “present” your pitch better to investors

Fantastic for outlining your MVP
and other stakeholders
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Fundamental Approach of both?

• Both Lean and Business model canvas follow the “Causal” thinking approach
• “If I have to achieve {some end result}, I will need the following {means}
• Both Lean and Business model canvas approaches begin with the “Result”
you want to achieve, and build on the “resources” you need to achieve these
results.
Business model case studies
Wildfang / Spotify / Fasten
 A fundamentally different approach
E ectuation

• E ectuation assumes that you begin with your {means} or resources that are
available to you.

• Based on what you already have, you then build on the potential {end
results}

• You could even imagine multiple possible end results, based on your
“resources” or “means”.
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An example of both logic types

• A chef using Causal Logic would decide what to cook rst, and then gather
the ingredients needed to cook it.

• A chef using E ectual logic would look in the fridge rst, see what is there
and then put together a meal based on what is available.
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What is effectuation?

Effectuation is a logic of entrepreneurial expertise.

What makes great entrepreneurs isn’t generic or personality traits, risk-seeking behaviour,
money, or unique vision.

Effectuation research has found that there is a science to entrepreneurship and that great
entrepreneurs across industries, geographies, and time use a common logic, or thinking process,
to solve entrepreneurial problems.

Effectuation is a logic of entrepreneurial expertise that both novice and experienced

entrepreneurs can use in the highly unpredictable start-up phase of a venture to reduce failure
costs for the entrepreneur.
Five Principles
Amarendra Sahu. Vipul Parekh.
Richard Branson
Dhirubhai Ambani
Vijay Shekhar Sharma
Steve Jobs. Mukesh Ambani.
Are YOU Causal or Effectual?
What would you do?

You are Gyanesh Pandey, an Electrical Engineer from IT BHU (1995-99), who
completed his Masters at Renssaelaer Polytechnic. You come from the
outskirts of Patna, in Bihar.

After working for a few years in the US, you return to India (in 2005) to “do
something” for the poor in India.

You initially work on solar lights, and a project to generate biofuel using
Jethropha seeds; both of which are not scaling.

What would you do next?

What would you do?

You now meet with your classmate from IT BHU; Manoj Sinha, who is an
electronics engineer, studying at the University of Virginia, Darden school of
Business.

You also have a chance meeting with a gasi er salesman in Patna. You also
notice that there are over a million kilograms of rice husk from rice mills in Bihar,
which are all waste.

You realise that in Bihar, most localities outside the main cities su er from severe
lack of power. There is no grid connecting these locations to the main power.

What do you do next? fi

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 What would you do?

You now focus on the development of the circuitry that would allow the systems
to most e ciently generate power. A friend working with the Ministry of New
and Renewable Energy (MNRE) helps you to get clearances.

You optimize the gasi er to use rice husks alone, then using the output of the
gasi er, fuel a generator and assemble a crude local power distribution network.

The village of Tamkuha, goes live in August 2007.

But ….
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What would you do?

Bihar is NOT a place where people are used to paying for power!

And so it is in the village of Tamkuha. Most people cheerfully tap into the “grid” you
create; and don’t pay for it.

The few who do pay, su er as you can’t sustain the power plant that you have built.

Your initial money ($60,000), that came from winning a social business competition
is rapidly running out.

What do you do?

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What would you do?

You now build a business model that heavily depends on community

involvement. Local entrepreneurs build your equipment. Local workers buy and
supply the rice husk. And local employees supervise the distribution of power.

You are now expanding to multiple locations in Bihar.

What would do next?

Husk Power Systems
Their story
Husk Power Systems
Achievements

400 villages in India, 150 in Tanzania served by Husk Power Microgrids

$25M raised, Series C

40 MW of power generation installed

200 people

Expansion into Solar

100% theft free

Effectuation Case Studies
Hanging Gardens / Medtronic
Questions?