TEACHING & LEARNING
A lawyer and physicist
turned Wharton student find common ground in mentoring relationship
OUTREACH
More
Than a Pet Project
Plus: Follow up on 2002 WBP Competition winner
Plus: Learn more about the Grand Prize winning team, PAWS
Building Entrepreneurial Businesses
Faces of Wharton Entrepreneurship
RESEARCH
Venture Capital Syndication
Pays off — and not just for the VC
Newer Web Companies Aim to Change Consumer Buying Habits
Outreach
Building Entrepreneurial Businesses
As part of the 2002 Wharton Entrepreneurship Conference, a panel of six experienced entrepreneurs answered questions about how they built their businesses. They shared much in common, especially passion. Yet each carried a blueprint for success very much their own.
In response to audience questions at the recent Wharton Entrepreneurship Conference in December 2002 a panel of experienced entrepreneurs came together in a meeting room at the Philadelphia Westin to share their mistakes and triumphs on everything from finding funding to the hiring (and firing) of staff.
The panel, moderated by David Geliebter, Managing Partner of Carrot Capital, featured (*denotes Wharton graduate):
- Anne-Marie Corner*, CEO and founder, Biosyn, which develops commercial applications for novel drug delivery products for reproductive and infectious diseases.
- John Doyle, founder, Jubilee Chocolates, a socially innovative producer of handmade chocolates
- Phil Heifetz*, CFO and director of business development, PlantGenix, which develops products to create healthier plants and improve crop yields..
- Bob Hornsby*, co-founder and president, Slingshot Solutions, an inventory disposition solutions provider.
- Brian LeGette*, founder, bigbangproducts, a lifestyle-driven apparel company with more than 100 products (including 180s, the wraparound-the-head style ear warmers).
An excerpt of some of the audience questions and responses follows.
How
did you come up with the idea for your business? How important is
it to be evolutionary
versus revolutionary?
Anne-Marie (Biosyn):
My idea came to me more than 10 years ago when it was just beginning
to be clear that AIDS
would develop
into a
devastating epidemic. I had been a medical researcher
at Penn and I knew I wanted
to do something that had a global impact on health.
We are now in trials but we're not over the finish
line yet. I have an unswerving belief that what I'm
doing is right and my product is better than any of
the others out there. The first round of venture capitalists
told
me at the end of that round they always believed I
could
do it — but
they were the same people telling me at the beginning
that since I had no business experience I wouldn't
be able to make it happen. You have to believe in yourself
and your idea no matter what.
Brian (bigbangproducts):
The idea of an earmuff isn't really exciting.
My team members and I fell into this idea while sketching
product concepts at the (Wharton MBA) pub during
preterm. We thoughtthe earmuff had the
biggest potential. We felt vanity would help create
a large market for earmuffs that don't mess
up your hair.
John (Jubilee Chocolates):
Why chocolate? Three years
ago I left my job as a financial analyst in New
York because
I was
fundamentally
unhappy
with the way my life was going. So I became a line
order cook and that's
where I got the idea to do with chocolate what
Starbucks had done with coffee. My gut feeling
is that there
is an opportunity here. We see growth
in the high-end gourmet industry.
Bob (Slingshot Solutions): I started working on my business
plan while I was a student; I spent
less
time in class
than I did
on my business
plan. One of my partners was having a hard time
returning an item he had purchased online. It
just sat on his
desk and never
got
picked up by the company. As we started studying
the problem of returns,
we
branched
out into getting rid of surplus and distress
inventory. Our business model shifted the more we learned
about the problems.
Phil (PlantGenix):
I was mentoring students when I got my idea. When I came to Penn I
had no idea
how
to run
a start
up, I
just knew I
wanted to do something with technology and
at Penn there is a lot of technology
in differing degrees of readiness. It's
been a process of going through what was available
and figuring out what could work as a company.
Q: How did you arrive at your business model
and how has the model changed?
How often do you challenge it?
John (Jubilee Chocolates):
Our initial plan was to do (candy) mix-ins
with organic chocolate.
I cold-called
important
people in the candy
industry and they said I'd never make
it. There's too much competition.
I reformulated and made some more calls to
people who really knew the market. These calls
and the
conversations I had helped me evolve my business
plan. It continues to evolve.
Bob (Slingshot
Solutions): We had to make several shifts
in our model — some
minor, some major. We started in Wharton
Business Plan Competition (See
related Knowledge@Wharton story)
For us it was a good process to go through.
We got useful feedback and push back that
helped shape our model. One person in particular was
very
helpful — he told us what was extraneous.
After that, we were able to gain a strategic
partner and started moving forward. Lately
we've
had to change our pricing to better fit the
market reality.
What is the biggest
mistake you made and what did you learn from it?
Phil (PlantGenix):
Not taking as much money as I could have. You can't
be thinking about down the road how you
might not have so much stake in the company. You need to make sure
you have the resources you need.
Don't pass up any opportunities.
Bob (Slingshot Solutions): For us the biggest
mistake, in hindsight, was a
strategic
partnership. It brought
in some
more investment
but the partnership ended badly. I
still might have entered into that
partnership, but I see now that I could
have covered ourselves better in the
contract language. I've learned
not to keep kicking myself for making
a mistake, but to keep on keeping on.
David (Carrot Capital): Just to give you
some perspective, my last business
sold
in 2000.
My old partner and
I still talk about
all
the horrible
mistakes we made. At the time we
thought they were life threatening, but we
got through them.Q:
How
did you find
the right team
to build the business? What exit
strategies do you have?
Bob (Slingshot Solutions):
As the business grows, it changes. Some
people are
better at starting
companies, not running
them. Part
of what drives
exit strategies is realizing that
as your company grows
and as you bring in a new team,
it will be a different place.
Our biggest
gap
was technology
development — none of our partners
were strong at coding software.
We went through two people before
we
found the right software person
to lead the tech team. But it's
also important to bring onboard
people who think differently from
you. They
need to share the same vision
but by seeing things a little differently
they will help you fill in the
gaps in your vision.
Brian (bigbangproducts):
Most outside
investors want an exit between
five and 10 years.
As you acquire
external capital
the exit strategy
becomes dictated by what these
investors need. If you focus
on your people, empower your
employees, create a great environment and
give them challenging
work, they will like being there.
Even if you only have two or
three employees it's important
to do that. This is how you can
sell your vision.
Anne-Marie (Biosyn):
Integrating people has been
our mandate,
the same as in
big pharmaceutical
firms. The
tech person
we hired had
more secretaries
at his old job than we had
employees at the time.
He's been with
us three years now. The important
thing was finding someone who
believed in our mission here
at Biosyn. The hardest thing,
though, is firing someone
who isn't working out.
John (Jubilee Chocolates): We've
had success in hiring people
in our product and sales
and marketing areas. The
key to
doing this is the
ability to broadcast who
we are and what we believe
in
very clearly. If we get that
message out to enough people,
we actually are able to
choose who we want as funders,
employees and vendors. We
also rely heavily on Internet,
by
creating instructional materials
and manuals that gets
new employees up to speed
very quickly.Q: How did you
get
your first customer?
Phil (PlantGenix): We were lucky
to get Scotts Lawn
and Garden
as our first
customer.
We
convinced them
that
we had a lot
of R&D going
on. Scotts has 99 percent
brand awareness and this
was a big boost to us before
we even had our product.
David (Carrot Capital): When
we had our first startup,
there were
seven
of us
and the phones
never rang.
When our first
customer came to the
office, we made sure
we had
friends call us so the
office sounded
busy.
When do you bootstrap?
When do you go to the
investment community
and
what does
that
do to
your control over
the company?
Anne-Marie (Biosyn): Bootstrapping was synonymous
with Biosyn
for years, and
I can tell you
it's not the
way to run a business.
It's
a good way to start,
but you eventually
need serious money
and serious investors.
David (Carrot Capital):
Bootstrapping means
you will be keeping
more equity. If
you get outside
capital,
you have
to give
up something. I
say if
you can get money
from other
sources, including
suppliers and
customers, do it.
Bob (Slingshot Solutions): The
amount of bootstrapping
varies
by industry.
If your
business model
is right for
bootstrapping and
you're
growing organically
you
can do okay with
bootstrapping.
If your business
can give you
a near-term return,
then bootstrap.
If you have cyclical
cash
flows or a long
development time,
then find outside
financing.
What have
you learned
about yourself
during
this business
development
process, and what words
of wisdom do
you have for
students
here today?
Brian (bigbangproducts): It's good to have a catastrophic failure
in your past,
but not in your present. In our second round of financing, we raised
$1.8 million and launched 10 products, most of which failed.
I learned
what I was good at and what I was bad at — like listening.
I always
preached listening to advice, but it turned out to be one of my biggest
failings.
Anne-Marie (Biosyn):
When I was in
school,
I took a lot
of law
classes
and that
has turned
out to
be very helpful
in
terms of
being knowledgeable
about contracts.
You also
need to
be strategic
thinkers
about
where
your
business
is going.
Things
never work out
the way you think
they will,
so you
always have
to have
a Plan B. You need
to be
able to
see the
long-term
picture.
You
need
to become
a good
decision
maker on imperfect
information,
to be able
to make
the decision
to
keep moving
forward.
The information
is never
ever perfect.
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